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THE   FINANCIAL   HISTORY 
OF  NEW  YORK  STATE 

FROM  1789  TO  1912 


BY 

DON  C.  SOWERS,  A.  B. 

Professor  of  Municipalities  and  Public  Accounting 
University  of  Oregon 


SUBMITTED    IN    PARTIAL    FULFILMENT    OF    THE    REQUIREMENTS 

FOR    THE    DEGREE    OF    DOCTOR    OF    PHILOSOPHY 

IN   THE 

Faculty  of  Political  Science 
IN  Columbia  University 


NEW  YORK 
1914 


m 


THE   FINANCIAL   HISTORY 
OF  NEW  YORK  STATE 


FROM  1789  TO  1912 


DON  C.  SOWERS,  A.  B. 

Professor  of  Municipalities  and  Public  Accounting 
University  of  Oregon 


SUBMITTED   IN   PARTIAL   FULFILMENT    OF   THE   REQUIREMENTS 

FOR    THE    DEGREE   OF   DOCTOR   OF   PHILOSOPHY 

IN  THE 

Faculty  of  Political  Science 
IN  Columbia  University 


NEW  YORK 
1914 


4 


Copyright,  1914 

BY 

DON  C.  SOWERS 


/ 


CONTENTS 


CHAPTER  I 

PAGB 

Economic  Factors 

The  close  relations  existing  between  economic  conditions  and  fiscal 
policies  is  shown  for  the  three  periods  into  which  our  study  may 
be  divided — The  period  1789  to  1842  may  be  characterized  as  a  pa- 
ternalistic period,  which  is  the  natural  result  of  the  poverty  of  the 
people  and  the  large  resources  of  the  state;  the  laissez  faire 
period,  lasting  from  1842  to  i88o  and  finally  the  period  1880  to  1912, 
which  is  one  of  state  regulation  and  control  of  all  industries  .    .      11 

CHAPTER  II 
Political  Factors 

Fiscal  policies  as  influenced  by  party  politics— How  progress  has 
been  achieved — The  Constitutions  of  1777,  1821,  1846  and  1894  .     28 

CHAPTER  III 
Sale  and  Management  of  Public  Lands 

Early  policies  and  their  effect  upon  fiscal  affairs — Poor  accounting 
methods  and  political  scandals— Changes  in  the  state's  policy;  its 
effect  upon  taxation — Methods  of  financing  land  purchases— Pres- 
ent holdings  and  policies 37 

CHAPTER  IV 
The  Banking  System 

Early  banking  laws  and  corrupt  practices  in  the  legislature  described 
— The  Safety  Fund  Banking  System,  its  advantages  and  its 
shortcomings— Causes  for  its  failure— The   Bond-Deposit  System 

its  advantages  and  disadvantages — Conclusion 48 

329]  5 


282327 


[330 


6  CONTENTS 

CHAPTER  V 

Internal  Improvements— Part  I 

Antecedents  of  the  Erie  Canal — The  Canal  Fnnd — Opening  of  the 
Erie  Canal  in  1825— Mania  for  canals  throughout  the  state— Its 
effect  upon  the  state  finances— Panic  of  1837 — Plans  for  enlarg- 
ing the  canal— Financial  distress— The  Constitution  of  1846— Canal 
Investigations — Methods  of  financing  the  Erie  enlargement — 
Further  canal  investigations 60 

Internal  Improvements— Part  II 

State  aid  to  railroads  and  private  canal  companies — Canals  and  rail- 
roads competition— Railroads  and  the  legislature — The  Erie  rail- 
road contest — Railroads  in  politics 82 

CHAPTER  VI 

Internal  Improvements— Part  III 

Later  improvements  of  the  Erie  canal — Results  of  the  Constitu- 
tional Convention  1867-8— Severe  railroad  competition  and  abol- 
ishment of  the  tolls— The  Nine  Million  act— Events  leading  up  to 
the  Barge  canal — Canal  sinking  funds — Conclusion 99 

CHAPTER  VII 

Revenues 

General  property  tax  and  its  limited  use  prior  to  1842— The  tax 
system,  assessment,  valuation,  equalization,  collection,  and  rate — 
The  tax  on  incorporated  companies  in  1823— Local  taxation  of 
corporations— The  breakdown  of  the  general  property  tax — 
Establishment  of  State  Board  of  Equalization — Tax  commissions 
of  1862;  1870-1  and  1880 — Conclusion .   .    114 

CHAPTER  VIII 

Revenues  (Concluded) 

Auction  duties — Steamboat  tax — Peddler's  license  tax — Lotteries- 
Proceeds  from  salt  v^^orks— Income  from  state  funds— Proceeds 
from  public  lands — Fees  and  fines  of  public  officers— Proceeds 
from  state  institutions — Fees  of  bank  department,  insurance  de- 
partment and  railroad  tax— Subventions  from  U.  S.  Government 
— U.  S.  war  claims — The  new  tax  system— Corporation  tax — 
Inheritance  tax— Liquor  tax — Racing  tax — Stock  transfer  tax — 
Mortgage  tax— Secured  debt  tax 133 


"'-r  ^:^i\,.r 


33 1  ]  CONTENTS  7 

PAGB 

CHAPTER  IX 

Expenditures 

Administrative— Legislative— State  printing— Judicial—  Regulative 
Public  Health — Educational — Agricultural  —  Defensive — Penal — 
Curative — Charitable — Protective — Constructive — General.    •    .    .    184 

CHAPTER   X 

Management  of  Funds 

Early  methods  of  financiering — Opposition  to  taxation — Abuses  of 
the  supply  bill — Abuses  of  sinking  funds — Borrowing  from  trust 
funds — Tempoary  loans  and  revenue  bonds — Comptrollers  and  their 
reports— Present  work  of  the  comptroller's  department — Super- 
vision of  public  accounts— Court  and  trust  funds — Municipal  ac- 
counting— Bureau  of  Auditor — The  Budget— Conclusion  ....    227 

CHAPTER  XI 

State  Funds 

The  General  Fund — State  debt  and  funding  act  of  Congress — State 
loans  and  investments-  Educational  funds:  Common  School  Fund; 
Literature  Fund;  U.  S.  Deposit  Fund;  College  Land  Scrip  Fund; 
Cornell  Endowment  Fund;  Elmira  College  Educational  Fund  and 
Free  School  Fund — Trust  Funds:  Bank  Fund;  Mariners  Fund; 
Military  Record  Fund;  Soldiers'  Allotment  Fund;  Trust  Fund  for 
the  Payment  of  Bounties;  Metropolitan  Police,  Health  and  Fire 
Department  Funds;  Women's  Monument  Fund;  Public  Adminis- 
trator's Fund;  Twenty-year  Court  and  Trust  Fund  and  Retirement 
Fund  for  State  Hospital  Employees — Sinking  Funds — Funds  main- 
tained a  part  from  treasury  funds;  William  Vorce  Fund  and  Cana- 
seraga  Creek  Improvement  Fund 254 

CHAPTER  XII 

Conclusion 287 

APPENDICES 

I.  Classified  expenditures  from  1789  to  1912 295 

11.  Classified  receipts  from  1789  to  1912 324 

III.  Table  giving  population,  real  and  personal  property  and  amount 

of  town,  county  and  state  taxes  from  1830  to  191 1 332 

IV.  State  debt  from  1816  to  1912 336 

V.  Corporation  taxes  classified  as  to  source  from  1882  to  1912  .    .    340 

VI.  Assessed  valuation  of  special  franchises  1900  to  1912 342 


PREFACE 

This  monograph  is  one  of  a  series  of  studies  which  has 
been  prepared  under  the  direction  of  the  Department  of 
Economics  and  Sociology  of  the  Carnegie  Institution  of 
Washington,  as  a  basis  for  writing  the  economic  history  of 
the  United  States.  The  field  of  inquiry  was  divided  into 
twelve  divisions,  one  of  which  dealt  with  the  problems  of 
federal  and  state  finance,  including  taxation,  and  it  is  to  this 
group  of  studies  that  the  present  monograph  belongs.  The 
detailed  information  derived  from  intensive  studies  of  the 
financial  histories  of  several  typical  states  representing  var- 
ious sections  of  the  country  will  be  combined  later  in  a  study 
covering  the  whole  field  of  inquiry. 

The  following  chapters  attempt  to  describe  in  as  brief 
and  concise  a  manner  as  possible  the  methods  employed  by 
the  State  of  New  York  in  acquiring  revenues,  the  purposes 
for  which  these  revenues  have  been  expended  and  the 
methods  which  have  been  employed  in  the  management  of 
the  funds  in  the  treasury.  These  three  elements  of  our 
problem  have  passed  through  almost  revolutionary  changes 
as  the  state  has  emerged  from  a  sparsely  settled  agricul- 
tural community  to  a  densely  populated  industrial  state,  and 
it  has  therefore  been  thought  necessary  to  give  some  ac- 
count of  the  changes  in  economic  and  political  conditions 
and  to  point  out  the  significance  of  these  changes  in  relation 
to  financial  policies.  The  evolution  which  has  taken  place  in 
New  York  state  is  typical  of  the  changes  which  are  being  re- 
peated and  will  be  repeated  again  and  again  in  other  states, 
and  the  manner  in  which  New  York  has  met  and  solved  the 
333]  9 


lO  PREFACE  [334 

new  problems  which  have  confronted  her  in  the  various 
stages  of  her  development,  cannot  be  otherwise  than  in- 
structive and  helpful  to  other  states  which  are  undergoing 
a  similar  development. 

I  am  under  many  obligations  to  my  professors  of  the 
Faculty  of  Political  Science  of  Columbia  University  for 
encouragement  and  assistance;  to  Professor  E.  R.  A.  Selig- 
man,  under  whose  guidance  and  direction  the  study  was 
made;  to  Professor  Henry  B.  Gardner,  of  Brown  Univer- 
sity, for  suggestions  and  outlines  of  a  similar  study  of 
Rhode  Island ;  to  Professor  H.  R.  Seager  for  valuable  sug- 
gestions and  criticisms,  and  to  Miss  Adelaide  R.  Hasse  for 
important  assistance  in  the  collection  of  material. 

Further  thanks  are  also  due  to  Mr.  John  J.  Merrill 
and  Judge  McElroy,  of  the  State  Comptroller's  Office  at 
Albany,  who  have  read  the  chapters  dealing  with  the  cor- 
poration and  inheritance  taxes;  to  Mr.  W.  A.  Shaible,  of 
the  Bureau  of  Canal  Affairs  of  the  Comptroller's  Depart- 
ment, who  has  read  the  historical  chapters  and  given  val- 
uable suggestions,  and  to  Mr.  J.  A.  Wendell,  Deputy  Comp- 
troller, who  has  furnished  information  and  suggestions. 

Grateful  acknowledgment  is  also  made  for  assistance  ren- 
dered by  the  Carnegie  Institution  of  Washington,  whereby 
this  study  was  made  possible. 

Don  C.  Sowers. 
Eugene,  Oregon,  January,  1914. 


CHAPTER  I 

Economic  Factors 

This  chapter  endeavors  to  show  the  intimate  relation 
which  exists  between  economic  conditions  and  fiscal  policies 
and  to  point  out  in  what  way  changes  in  economic  condi- 
tions have  caused  changes  in  fiscal  affairs.  The  methods 
of  deriving  revenue  and  the  objects  of  public  expenditure 
underwent  a  radical  change  as  the  state  emerged  from  a 
purely  agricultural  community  into  an  industrial  and  com- 
mercial commonwealth.  During  the  123  years  covered  by 
this  study  we  witness  the  growth  and  development  of  New 
York  State  from  a  timbered  region,  sparsely  settled  and 
deficient  in  wealth,  and  material  comforts,  to  a  great  and 
powerful  commonwealth,  surpassing  all  other  states  in 
population,  wealth  and  resources  and  comparing  favorably 
with  the  leading  countries  of  the  world.  The  vast  volume 
of  bus'ness  which  the  fiscal  officers  were  called  upon  to 
handle  made  necessary  a  transformation  in  accounting  and 
auditing  methods  which  resulted  in  differences  as  great  as 
are  to  be  found  between  the  book-keeping  methods  em- 
ployed in  managing  a  village  grocery  store  and  those  em- 
ployed in  handling  the  funds  of  a  million-dollar  corporation. 

Period  1789-1840 

The  population  in   1790  amounted  to  340,120  persons, 

settled  for  the  most  part  in  the  southeastern  section  of  the 

state  along  the  valleys  of  the  Hudson  and  Mohawk  rivers. 

New  York  City,  with  a  population  of  33,000  persons,  en- 

335]  II 


12  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [336 

joyed  fewer  comforts  than  perhaps  are  enjoyed  to-day  in 
the  most  remote  and  backward  city  of  the  United  States. 
Wall  Street  was  the  fashionable  residence  district  and 
Broadway  was  a  country  drive.  Albany  was  still  a  Dutch 
city  with  some  3,000  inhabitants.  Immigration  was  largely 
confined  to  the  rivers  and  lakes.  Utica,  Syracuse,  and  Sen- 
eca Falls  were  frontier  settlements,  chiefly  engaged  in  the 
fur  trade  with  the  Indians.  Western  New  York  was  still  a 
wilderness,  abounding  in  all  sorts  of  wild  game.  Buffalo 
and  Rochester  were  not  laid  out. 

During  the  decade  1820  to  1830  the  growth  of  population 
was  phenomenal.  New  York  City  increased  in  population 
64  per  cent;  Schenectady,  59  per  cent;  Troy,  120  per  cent; 
while  Buffalo  and  Rochester  increased  at  the  phenomenal 
rate  of  314  per  cent  and  346  per  cent,  respectively.  This 
incoming  tide  of  settlers  drove  back  the  wolves  and  bears, 
cleared  the  land  of  forest  and  established  homes.  By  1830 
all  the  arable  land  had  been  put  under  cultivation.  Flour, 
grist,  oil  and  saw  mills  arose  along  the  banks  of  lakes  and 
rivers;  towns  and  cities  sprang  up  as  if  by  magic.  The 
density  of  population  increased  from  seven  per  square  mile 
in  1790  to  forty  per  square  mile,  and  this  increase  was 
mainly  in  the  rural  population,  which  in  1830  comprised 
86  per  cent  of  the  total  population. 

Of  the  total  population  in  1840  of  2,428,921,  we  find 
that  689,302  persons  were  engaged  in  gainful  occupations, 
and  of  this  number  455,954  persons,  or  two-thirds,  were 
occupied  in  agricultural  pursuits.  Manufacturing  engaged 
173,193  persons;  trade  and  transportation,  41,146;  profes- 
sions, 14,111,  and  mining,  1,898.^  Agriculture  was  there- 
fore the  most  important  industry  and  down  to  the  period 

1  Report  on  the  Growth  of  Industries  in  New  York,  Department 
of  Labor,  1902,  p.  21. 


^527]  ECONOMIC  FACTORS  13 

of  the  Civil  War  it  remained  the  dominant  industry.  The 
state  ranked  first  in  the  production  of  barley,  oats,  buck- 
wheat, hops,  potatoes,  hay  and  wool  as  late  as  1840/ 

Rochester,  which  was  laid  out  in  18 12,  became  the  center 
of  the  milling  industry,  and  was  known  as  the  "  Flour 
City  ".  Grain  was  sent  here  from  Ohio,  Canada  and  Mich- 
igan and  shipped  from  here  to  Europe.  During  the  two 
decades  1836  to  1856  the  milling  industries  flourished  in 
Rochester,  Oswego  and  neighboring  towns,  until  the  trade 
was  usurped  by  Minneapolis  and  St.  Paul.  In  1840  there 
were  8,000  establishments  employing  10,000  men  and  pro- 
ducing products  valued  at  over  $16,000,000. 

Next  to  agriculture,  in  importance,  from  the  standpoint 
of  the  number  of  persons  employed  in  the  industry,  was 
manufacturing.  Although  this  industry  had  a  much  tardier 
development  in  this  state  than  in  Pennsylvania  and  the  New 
England  states,  yet  the  census  of  18 10  showed  that  a  good 
start  had  then  been  made,  and  before  1830  New  York  had 
assumed  the  priority  among  American  commonwealths. 

The  textile  industry  was  still  in  its  infancy  in  18 10,  and 
the  factory  system  was  just  beginning.  Most  of  the  tex- 
tiles were  still  made  in  the  families.  The  domestic  manu- 
factures continued  to  increase  until  about  the  year  1825,  in 
which  year  15,000,000  yards  of  cloth  were  made  in  the 
homes  of  the  people,  "  which  unquestionably  exceeded  the 
production  of  the  cotton  and  woolen  factories  of  the  state." 
By  1840  there  were  323  woolen  mills  employing  4,636  per- 
sons, and  117  cotton  mills  employing  7,407  persons.  The 
total  capital  invested  in  manufactures  in  that  year  was  $55,- 
252,779,  and  the  annual  value  of  the  products  was  $95,- 
840,194. 

1  Ibid. 


14         FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [338 

In  matters  of  transportation  we  find  great  activity  along 
every  line,  from  the  turnpike  road  to  the  modern  railroad. 
During  the  years  1799- 18 19,  the  legislature  passed  253 
acts  incorporating  turnpike  roads,  and  from  1790  to  18 18,  it 
authorized  70  bridge  companies.  There  were  also  21  toll 
bridge  companies  with  a  capital  of  $415,000.  As  early  as 
1792  the  Northern  and  Western  Inland  Lock  Navigation 
Companies  were  incorporated  to  construct  canals  from  the 
Hudson  River  to  Lakes  Ontario  and  Champlain.  During 
the  next  fifteen  years  no  less  than  twelve  acts  were  passed 
respecting  inland  navigation.  The  great  progress  in  canal 
construction,  however,  dates  from  the  year  18 17,  when  the 
Erie  Canal  was  begun.  In  1825  the  state  had  363  miles  of 
canals,  but  during  the  next  fifteen  years  the  mileage  more 
than  doubled,  so  that  by  1840  the  total  canal  mileage 
amounted  to  840  miles. 

Steam  navigation  on  the  Hudson  began  in  1807,  and  in 
18 14  the  New  York  and  New  Jersey  Steamboat  Ferry  Com- 
pany began  to  run  steam  ferries  between  New  York  and 
Brooklyn. 

The  construction  of  railroads,  which  began  about  1831, 
made  such  progress,  that  by  1840  there  had  been  constructed 
575  miles  of  railroads. 

Since,  during  these  fifty  years  of  the  state's  history,  agri- 
culture was  the  dominant  industry,  the  needs  of  the  farmer 
were  those  which  dominated  the  minds  of  the  people.  As 
in  all  primitive  communities  these  needs  were  two  in  num- 
ber, namely,  for  capital  and  for  transportation.  It  is 
therefore  not  strange  that  the  legislators,  whose  success  de- 
pends so  largely  upon  the  degree  with  which  they  forecast 
the  needs  of  a  community,  should  have  set  to  work  to  satisfy 
these  two  prime  needs. 

The  policies  adopted  were  the  following:  (i)  to  stimu- 
late and  increase  population  through  the  sale  of  public  land, 


339]  ECONOMIC  FACTORS  15 

(2)  to  supply  capital,  (3)  to  provide  transportation  facili- 
ties, and  (4)  to  regulate  banks. 

As  the  country  was  new  and  developing  rapidly  in  many 
directions,  capital  was  scarce  and  in  great  demand.  For 
the  state,  it  was  a  period  of  surplus  financiering  due  to  the 
large  receipts  from  the  sale  of  public  lands  and  the  interest 
derived  from  the  state  securities,  which  became  productive 
through  the  funding  act  of  Congress.  The  struggling 
farmers  and  manufacturers  looked  to  the  state  for  aid  and 
assistance.  The  state  responded  by  loaning  its  funds  to 
cities,  banks,  manufacturing  companies,  counties,  corpora- 
tions and  individuals ;  it  assisted  many  a  struggling  manu- 
facturer by  loaning  him  funds  or  by  discharging  debts  due 
to  the  state,  and  it  became  a  stock-holder  in  numerous  banks 
and  navigation  companies. 

In  the  matter  of  providing  transportation  facilities  the 
state  contented  itself  for  a  short  time  with  granting  assist- 
ance and  encouragement  to  private  enterprise;  but  this 
proved  too  slow  and  finally  in  181 7  it  took  upon  itself  the 
burden  of  digging  canals.  With  the  successful  completion 
of  the  Erie  Canal  in  1825,  and  its  stimulating  effect  upon 
all  branches  of  business,  a  perfect  mania  for  canal  construc- 
tion swept  over  the  state  and  each  county  clamored  for  a 
canal  of  its  own  at  the  expense  of  the  state.  The  result  of 
this  experiment  was  not  a  happy  one.  Canals  were  con- 
structed in  regions  where  it  was  practically  certain  they 
would  not  prove  to  be  profitable  ventures.  The  canal  debt 
grew  year  by  year  with  no  adequate  provision  for  its  pay- 
ment. This  policy  reached  its  culmination  in  1842,  when 
to  this  large  canal  debt  there  was  added  an  enormous 
issue  of  state  stocks  created  for  the  benefit  of  railroad  com- 
panies, which  failed  to  pay  the  interest  on  these  sums. 
Many  of  these  companies  failed,  the  state  stocks  became  a 
burden  on  the  state  finances,  and  the  state  found  itself  upon 
the  verge  of  bankruptcy. 


l6  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [340 

The  remaining  factor  in  the  situation  had  to  do  with  the 
regulation  of  banks.  For  at  least  a  quarter  of  a  century 
the  corrupt  practices  in  the  legislature  centered  around  the 
granting  of  bank  charters.  It  was  the  old  problem  of 
monopoly  and  the  question  at  issue  was  the  attempt  to  dis- 
connect the  government  from  the  banking  power.  In  this 
field  of  business  it  early  developed  that  unrestricted  and 
unregulated  competition  did  not  work  so  as  to  insure  a  fair 
degree  of  justice  and  equality  between  man  and  man,  and 
governmental  control  became  necessary.  Accordingly,  gen- 
eral banking  laws  were  passed  and  more  strict  regulation 
was  effected. 

The  connection  between  economic  conditions  and  politi- 
cal and  fiscal  policies  is  thus  seen  to  have  been  a  close  and 
vital  one.  The  two  reacted  upon  each  other  and  a  study 
of  one  would  be  incomplete  without  some  consideration  of 
the  other. 

Period  1840-1880 

During  the  four  decades,  1840- 1880,  there  were  marked 
changes  in  economic  conditions.  Up  to  1870,  agriculture 
remained  the  dominant  industry;  the  acreage  of  improved 
lands  and  the  value  of  farm  lands  and  improvements  stead- 
ily increased.  During  the  decade  1870- 1880,  however,  New 
York's  agriculture  began  to  feel  the  competition  resulting 
from  the  development  of  western  agricultural  lands;  a  de- 
preciation of  farm  values  began  and,  by  1880,  Ohio  had 
wrested  from  New  York  the  leadership  in  American  agri- 
culture.^ 

Side  by  side  with  the  decline  of  agriculture,  there  was 
going  on  the  development  of  manufacturing  industries, 
which,  in  the  value  of  their  products,  almost  equaled  those 
of  agriculture  in  i860,  and  by  1870  had  surpassed  them  in 

1  Report  of  New  York  Department  of  Labor,  1902,  p.  23. 


341]  ECONOMIC  FACTORS  ly 

value.  Manufacturing  industries  had  become  well  estab- 
lished by  the  middle  of  the  century,  and  the  development 
which  followed  during  the  next  few  decades  was  amazing. 
The  total  product  of  New  York  factories  in  1850  was  only 
one-tenth  of  the  product  in  1880,  and  did  not  equal  the 
value  of  the  products  of  the  clothing  trade  alone  at  this  later 
period.  There  were  14,965  establishments  with  products 
valued  at  $69,000,000  in  1845,  ^"^^  by  1880  the  number  had 
grown  to  42,739,  and  the  gross  value  of  the  product 
amounted  to  $1,000,000,000.  The  number  of  wage-earn- 
ers employed,  and  the  total  wages  paid  in  1850  were  200,000 
and  $50,000,000,  respectively,  while  in  1880  they  amounted 
to  500,000  and  $200,000,000,  respectively.^ 

The  industries  which  showed  the  most  rapid  progress 
were  those  which  produced  the  luxuries  of  life.  Confec- 
tioneries, bakeries,  painting  and  paperhanging  establish- 
ments grew  in  importance ;  carpets  and  rugs,  silks,  hosiery, 
musical  instruments,  cigars  and  tobacco,  canning  and  dairy 
products,  were  all  developed  during  this  period.  Elec- 
trical apparatus,  connected  with  the  telephone  and  telegraph, 
and  car  and  railway  construction  shops  underwent  marvel- 
ous development.  On  the  other  hand,  sawmills  and  brew- 
eries decreased  in  number. 

It  was  pre-eminently  the  period  of  the  development  of 
transportation  and  communication  facilities;  the  railroads, 
the  telephone  and  telegraph,  express  companies  and  street 
railways,  all  showed  a  marvelous  development,  which  ex- 
erted a  far-reach'ng  effect  upon  economic  life. 

The  railroad  mileage  increased  from  575  miles  in  1840 
to  5,957  miles  in  1880.  The  two  great  railroad  corporations 
were  the  New  York,  Erie  and  Western  and  the  New  York 
Central  and  Hudson  River;  the  former  chartered  in  1832, 

1  Ibid.,  p.  7^' 


l8  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [342 

extended  its  line  to  Dunkirk  in  185 1,  and  the  latter  was 
completed  from  New  York  to  Buffalo  the  same  year.  By 
1880  these  two  corporations  together  employed  27,000  per- 
sons, and  paid  in  wages  over  $14,000,000/ 

The  express  business,  which  was  started  by  William 
Harnsden  in  1839  was  fully  developed  by  1845.  By  1880, 
twenty-two  cities  in  the  state  had  installed  telephone  sys- 
tems, with  a  total  length  of  wires  of  over  8,000  miles. 
Ocean  cables  and  international  postal  arrangements  made 
communication  possible  and  cheap  with  all  parts  of  the 
world. 

We  find  the  distribution  of  the  population  among  the  five 
leading  occupations  as  follows  in  1880:  agriculture,  379- 
178;  professional  services,  88,370;  domestic  and  personal 
service,  443,883;  trade  and  transportation,  346,590;  and 
manufacturing  pursuits,  626,624.  These  changes  resulted 
in  a  shifting  of  the  population  from  rural  to  urban  life.  In 
1840  there  were  only  seven  cities  of  over  8,000  inhabitants; 
in  1880  there  were  thirty-three.  The  density  of  population 
increased  during  the  same  time  from  51  to  107  inhabitants 
per  square  mile.  The  rural  population  which,  in  1840,  com- 
prised 81  per  cent  of  the  population,  had  now  decreased  to 
49  per  cent,  and  New  York  City  alone  now  contained  about 
38  per  cent  of  the  total  population.  The  growth  in  wealth, 
as  indicated  by  the  assessed  valuation  of  real  and  personal 
property,  showed  an  increase  from  $263  to  $528  per  capita. 

The  period  presents  a  striking  contrast  to  the  earlier 
period  from  1789  to  1842.  The  earlier  period  was  one  of 
comparative  poverty ;  wants  were  few  and  simple,  and  while 
the  necessaries  of  life  were  abundant,  luxuries  were  rare. 
The  influence  of  the  state  was  exerted  in  many  ways  to 
assist  the  people  in  their  struggle  for  economic  independ- 

1  Census  of  1880,  Transportation,  p.  265. 


343]  ECONOMIC  FACTORS  1 9 

ence.  This  period,  on  the  other  hand,  was  one  of  unex- 
ampled prosperity  and  progress.  Wealth  was  being  accu- 
mulated by  leaps  and  bounds : 

The  simple  truth  was  that  the  development  of  the  railroads 
had  created  a  revolution  in  economic  conditions  and  the  coun- 
try was  producing  real  wealth  as  never  before  in  the  history 
of  the  world.  In  spite  of  two  severe  panics  and  a  Civil  War, 
in  spite  of  the  inflated  currency,  fraud,  ignorance,  and  specu- 
lation, there  was  also  going  on  a  production  of  wealth  which 
exceeded  all  experiences.^ 

All  eyes  were  now  turned  away  from  the  state  as  an  aid 
to  industrial  enterprise,  and  attention  was  centered  upon  the 
rising  powers  of  manufactures  and  railroads.  The  state 
was  no  longer  needed  to  encourage  industries;  the  indus- 
tries had  become  self-sufficient  and  all  powerful.  State 
regulations  were  regarded  as  a  check  and  hindrance  to 
progress.  It  was  pre-eminently  the  laissez-faire  period  of 
New  York  history.  The  state  withdrew  from  the  domain 
of  internal  improvements  as  rapidly  as  possible  and  left  the 
field  open  to  private  capital  and  initiative.  With  this  with- 
drawal we  note  the  rise  of  corporate  power.  The  few  feeble 
attempts  of  the  state  to  regulate  rates  on  railroads  were 
soon  thrown  off  and  the  iron  arms  of  this  mighty  power 
stretching  out  in  all  directions  reached  the  most  firmly  es- 
tablished institutions,  while  the  legislature  and  the  courts 
became  as  plastic  as  clay  in  its  hands.  The  same  disgrace- 
ful scenes  which  were  enacted  in  the  legislature  in  connec- 
tion with  the  granting  of  bank  charters  in  the  twenties  were 
repeated  in  the  sixties  on  a  larger  scale.  When  im- 
portant bills  affecting  railroad  interests  were  pending  before 
the  legislature,  all  ordinary  business  was  comparatively  ne- 

1  C.  F.  Adams,  Chapters  of  Erie. 


20  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [344 

glected.  Groups  of  legislators  gathered  about  the  hallways 
discussing  in  undertones  the  amount  which  was  to  be 
charged  for  their  votes. 

One  thing  is  very  clear.  The  golden  age  of  purity  and 
of  simplicity  disappeared  with  the  growth  of  wealth  and 
of  material  advancement.  The  homely  virtues  of  simplicity, 
temperance  and  economy  gave  way  to  a  vulgar  display  of 
wealth  and  extravagance.  This  change  affected  the  morals 
of  the  people.  The  more  fortunate  individuals  sought  to 
ape  the  doings  of  European  courts  in  the  splendor  of  their 
equipages,  the  costliness  of  their  gowns  and  jewelry,  the 
magnificence  of  their  homes,  and  the  grandeur  of  their  en- 
tertainments. The  mad  scramble  for  wealth,  power  and 
position  had  its  effect  upon  city  councils  and  state  legisla- 
tures and  produced  the  greatest  era  of  political  corruption 
which  this  country  had  yet  experienced. 

The  memorable  contest  between  the  directors  of  the  Erie 
Railroad,  waged  between  Commodore  Vanderbilt  on  the  one 
side  and  Gould,  Fiske  and  Drew  on  the  other,  was  but  one 
of  the  disgraceful  occurrences  of  the  period.  Vanderbilt, 
in  his  attempt  to  corner  the  stock  of  the  Erie,  spent  nearly 
$16,000,000  in  buying  stock,  which  his  opponents  were  is- 
suing fraudulently.  A  Wall  Street  muddle  was  transferred 
to  the  courts,  and  here  injunctions  and  counter-injunctions 
resulted  in  no  definite  action.  The  matter  was  then  trans- 
ferred to  the  legislature,  and  here  the  outcome  apparently 
depended  solely  upon  which  side  would  pay  the  most  money 
for  the  votes  of  the  legislators.^ 

It  was  the  era  of  the  Tweed  Ring  in  New  York  City 
politics,  when  the  municipal  treasury  was  robbed  of  mil- 
lions in  the  most  bare-faced  and  reckless  fashion.  From 
January  ist,  1869,  to  September  i6th,  1871,  the  city  print- 

1  Breen,  Thirty  Years  of  New  York  Politics,  p.  142. 


345]  ECONOMIC  FACTORS  21 

ing  cost  $7,168,212,  while  in  1895  the  total  expenditure 
for  printing  was  $265,861.  During  these  three  years,  $3,- 
221,865  was  spent  for  furniture,  repairs  and  plumbing  for 
armories  and  drill  rooms,  which  was  worth  about  $200,000. 
The  new  court  house  cost  the  city  twelve  or  thirteen  mil- 
lions. The  laying  out  of  parks  and  the  improving  of  streets 
was  carried  out  on  the  same  scale  of  extravagance.  On 
nearly  all  of  these  bills  for  expenditure  the  "  Ring  "  leaders 
drew  65  per  cent  of  the  amount  paid.  The  total  addition  to 
the  permanent  debt  due  to  this  brief  period  of  corruption 
was  over  $61,000,000.^ 

Charles  Phelps,  a  clerk  in  the  office  of  the  State  Treas- 
urer, embezzled  over  $300,000  of  the  state  funds  in  1873. 
The  lavish  appropriations  of  the  legislature  for  charitable 
institutions  and  state  undertakings  swelled  the  expenditures 
to  unusual  proportions,  and  deficits  became  an  annual  oc- 
currence. 

The  rapid  development  of  manufacturing  industries 
brought  to  view  now,  for  the  first  time,  the  evils  which  ac- 
company them.  The  factory  system  which  had  grown  up 
with  its  men,  women  and  children  on  duty  13  and  14  hours 
a  day  now  culminated  in  strikes  on  the  part  of  the  working 
people  for  a  lo-hour  day.  The  strained  situation  aroused 
the  emotions  of  the  clergy  and  other  idealists  of  the  period. 
One  result  was  the  Brook  Farm  experiment  in  1842.  In 
1845,  the  industrial  congress  arose  with  a  double  platform 
of  land  reform  and  a  lo-hour  day.  George  Evans,  Arthur 
Brisbane  and  Horace  Greeley  became  the  theorists  and 
spokesmen  of  the  new  movement.  Their  plan  of  reform 
was  through  legisla<-ion.  As  the  tariff  gave  protection  to 
the  capitalists,  so  laws  should  be  passed  protecting  the 
laborer.     "Young  America"  and  "The  Tribune",  both 

1  Durand,  Financial  History  of  New  York  City,  pp.  141,  146. 


22  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [346 

printed  in  New  York  City,  were  the  organs  of  the  move- 
ment. Pamphlets  were  printed,  one  of  which,  entitled, 
''  Vote  Yourself  a  Farm,"  was  circulated  by  the  hundred 
thousand.  The  practical  plans  proposed  by  the  labor  or- 
ganizations combined  productive  co-operation  and  strikes, 
as  the  two  equally  effective  modes  of  attack  upon  employers. 
The  era  of  talk  soon  gave  way  to  the  era  of  action,  and  by 
1853,  trade-unionism,  with  its  demands  for  recognition  of 
the  union,  minimum  wage,  as  well  as  for  shorter  hours  and 
higher  pay,  took  on  its  modern  form  in  politics.^  A  new 
element  was  thus  introduced  into  the  discussion  of  political 
and  fiscal  problems  which  was  to  have  far-reaching  effects 
upon  the  financial  situation. 

Thus,  with  the  growth  of  wealth  and  the  control  of  man 
over  nature,  a  new  problem  arose.  Capital  required  labor 
to  utilize  it,  and  labor  depended  on  capital  for  a  living. 
"  The  contest  was  not  now  between  man  and  nature,  but 
between  man  and  owners  of  capitalized  nature."  ^  The 
new  economic  conditions  produced  new  classes  and  inter- 
ests and  new  social  groups  arose  with  new  demands. 

Out  of  this  tumult  of  strife  for  wealth  and  power,  car- 
ried on  by  means  of  the  exploitation  of  the  weak  by  the  in- 
dustrially strong,  the  state  found  itself  face  to  face  with  the 
problem  of  dealing  with  defective,  the  dependent  and  the  de- 
linquent classes.  Clinton  prison  was  opened  in  1845.  The 
next  year  the  Rochester  Industrial  School  was  established. 
In  185 1  the  institution  for  the  feeble-minded  at  Syracuse, 
and  in  1865  the  state  school  for  the  blind  at  Batavia  opened 
their  doors.  Six  insane  hospitals  were  built  during  these 
decades.  The  sums  donated  to  hospitals,  dispensaries,  asy- 
lums, schools  and  other  associations  amounted  to  $200,000 
in  1863. 

1  Commons,  Industrial  History,  vol.  v,  p.  43. 

2  Ibid.,  p.  27. 


347]  ECONOMIC  FACTORS  23 

The  effect  of  these  lavish  expenditures  for  state  institu- 
tions in  so  short  a  period  was  an  increased  burden  of  taxa- 
tion. Since  the  general  property  tax  still  bore  all  the  bur- 
dens, it  was  put  to  a  severe  test  and  the  question  of  taxa- 
tion became  a  troublesome  problem.  While  New  York  had 
changed  from  an  agricultural  to  an  industrial  and  commer- 
cial state,  her  tax  system  had  remained  unchanged.  The 
burden  of  taxation  rested  upon  the  farmers  and  the  owners 
of  tangible  property  while  the  great  mass  of  industrial  capi- 
tal escaped  taxation.  State  assessors,  boards  of  equaliza- 
tion and  tax  commissions  discussed  the  problem  without 
any  definite  action  until  after  the  year  1880. 

Apart  from  the  canal  which  the  government  continued 
to  conduct  and  to  operate  in  an  inefficient  way,  it  was  pre- 
eminently the  laissez-faire  period  of  New  York  history. 
Corporations  and  individuals  carried  out  their  plans  and 
operations  without  check  or  hindrance  from  the  govern- 
ment. The  industrially  weak  were  crowded  out  of  the 
struggle  and  became  wards  of  the  state  while  the  indus- 
trially strong  pursued  their  way  unfettered. 

Period  1880-1912 

The  three  decades  1880  to  19 10  witnessed  the  continuance 
of  the  tendencies  and  forces  which  we  have  just  described. 
Agriculture  continued  to  decline  in  relative  importance  as 
compared  with  other  occupations  such  as  manufacturing 
and  trade  and  transportation,  although  in  the  absolute 
amount  of  wealth  produced  it  showed  a  decided  increase. 
The  number  of  persons  engaged  in  agricultural  pursuits  in 
1900  was  only  13  per  cent  of  the  total  number  engaged 
in  gainful  occupations  and  the  proportion  of  rural  popu- 
lation to  total  population  had  decreased  to  21  per  cent.  Not- 
withstanding all  these  untoward  conditions  New  York  still 
held  an  important  place  in  the  production  of  agricultural 


24  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [348 

products.  In  1900,  it  ranked  first  in  the  production  of 
potatoes,  hops  and  small  fruits,  second  in  the  production 
of  orchard  fruits  and  grapes,  and  third  in  the  production  of 
hay  and  forage.  The  total  value  of  her  farm  products,  in- 
cluding domestic  animals,  amounted  to  over  $300,000,000 
for  the  year  1910.  In  recent  years,  the  possibilities  of  in- 
tensive cultivation  and  of  the  employment  of  machinery 
and  new  inventions  have  again  turned  attention  toward 
agricultural  problems,  but  the  other  branches  of  industry 
have  continued  and  will  continue  to  claim  the  major  portion 
of  public  attention. 

During  recent  years,  the  industrial  and  commercial  ac- 
tivities have  been  of  paramount  importance,  and  it  is  to  these 
we  must  now  turn  if  we  are  to  understand  the  political  and 
fiscal  changes  which  these  changed  economic  conditions  have 
made  imperative.  The  state  was  eminently  fitted  by  both 
situation  and  natural  resources  to  become  a  great  indus- 
trial and  commercial  state.  Economical  transportation  and 
cheap  power  furnished  by  waterways  and  canals  made  pos- 
sible the  growth  of  manufacturing  centers  and  these  in  turn 
increased  the  volume  of  traffic  to  be  transported.  Possess- 
ing a  great  commercial  center,  the  people  of  the  state  have 
not  lacked  for  capital  to  develop  their  industries  and  the 
tide  of  immigration  which  passes  through  her  gateway  has 
furnished  an  abundant  supply  of  labor.  These  advantages 
are  continuous  and  cumulative,  and  in  looking  toward  the 
future  development  there  must  be  added  her  proximity  to 
the  coal  fields  of  Pennsylvania  and  the  natural  advantage 
of  her  abundant  supply  of  water  power  which,  when  trans- 
mitted into  electrical  energy,  will  run  factories  and  trans- 
portation facilities  for  many  years  to  come. 

The  result  has  been  that  over  half  of  the  wage-earning 
population  are  now  engaged  in  industrial  and  commercial 
pursuits.    In  191 1,  manufacturing  and  mechanical  pursuits 


349]  ECONOMIC  FACTORS  25 

engaged  34  per  cent  of  the  population  gainfully  employed, 
and  trade  and  transportation  pursuits  engaged  25  per  cent. 
In  1909,  the  44,935  manufacturing  establishments  in  the 
state  gave  employment  to  an  average  of  1,203,241  persons 
during  the  year,  and  paid  out  in  salaries  and  wages  $743,- 
263,000.  Of  the  264  classifications  used  in  the  presentation 
of  the  1909  manufacturing  statistics  for  the  country  as  a 
whole,  243  were  represented  in  New  York.  The  amount 
of  capital  invested  in  these  establishments  amounted  to  $2,- 
779,000,000,  while  the  net  wealth  created  by  manufacturing 
operations  amounted  to  $1,512,586,000.^ 

The  transportation  facilities  have  developed  to  keep  pace 
with  the  manufacturing  progress.  The  railroad  mil- 
eage in  June  30th,  1910,  was  8,416  miles.^  There  were  in 
addition  loi  street  and  electric  railroads  with  a  mileage  of 
3,885,  in  1907.  These  public  service  corporations  employed 
47,878  persons  and  paid  out  in  wages  $32,419,777.  The 
state  had  685,512  telephones  in  operation  in  1907  and  over 
one  billion  messages  were  exchanged.  The  total  express 
mileage  operated  in  1907  was  9,628  miles.  There  were  88 
telegraph  systems  in  use  for  electric  police  patrol  signaling 
and  electric  fire-alarm  signals.  ^ 

The  result  of  this  extraordinary  development  has  been 
that  78.8  per  cent  of  the  population  now  lives  in  cities  and 
villages  of  over  2,500  inhabitants,  and  the  average  density 
of  population  per  square  mile  for  the  state  is  191.  The 
congestion  of  population  has  made  demands  upon  the  state 
for  preserving  the  health  and  efficiency  of  its  workers,  for 
supplying  water  and  light,  and  for  providing  adequate  trans- 
portation facilities.     The  state  has  had  to  exercise  super- 

1  Census,  Report  on  Manufactures,  New  York,  p.  3. 

*  Statistics  of  R.  R.,  1910,  p.  12. 

•  Census  Bulletin  102,  pp.  44-46. 


26  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [350 

vision  over  its  wage-earners  in  factory,  shop  and  mine. 
Mine  inspectors,  factory  inspectors,  boards  of  mediation 
and  arbitration,  a  bureau  of  labor  statistics,  and  finally  a 
Department  of  Labor  have  been  the  outgrowth  of  the  new 
economic  conditions.  A  railroad  commission,  a  commis- 
sion on  gas  and  electricity,  an  electric  subway  commission, 
and  a  public  service  commission  have  been  created  in  recent 
years  to  supervise  the  transportation  companies.  The  num- 
ber of  commissions  created  since  1880  has  been  remarkable, 
and  the  cost  of  the  regulative  functions  of  government  is 
now  greater  than  the  cost  of  all  the  administrative  offices. 

The  new  economic  situation  has  resulted  in  the  formation 
of  new  social  forces,  and  it  is  out  of  the  conflict  between 
these  different  groups  with  their  various  desires  and  de- 
mands that  the  social  policy  arises. 

The  demands  of  laboring  classes  for  shorter  hours, 
higher  wages  and  better  living  conditions  are  opposed  by 
the  demands  of  the  employer  for  more  work  and  less  pay. 
The  demands  of  the  business  man  for  better  and  larger 
canals  are  opposed  by  the  average  taxpayer  who  sees  in  this 
an  increased  burden  of  taxation.  To  reduce  this  conflict  to 
a  minimum,  the  state  has  stepped  in  and  undertaken  the 
regulation  of  nearly  every  phase  of  industrial  life,  but  with 
added  expense  to  the  community.  This  added  expense 
means  more  taxation,  and  here  again  each  group  attempts 
to  shift  the  burden  to  the  other  group.  The  shifting  of  the 
ownership  of  wealth  from  the  agricultural  class  to  the  in- 
dustrial and  commercial  classes  has  resulted  in  the  growth 
and  development  of  a  new  system  of  taxation  in  the  state. 
Entire  dependence  upon  the  tax  upon  real  estate  has  given 
away  to  a  tax  upon  business,  corporations  and  other  forms 
of  wealth.  So  productive  were  these  new  sources  of  reve- 
nue that  until  recently  the  receipts  have  been  more  than 


35l]  ECONOMIC  FACTORS  27 

sufficient  to  defray  all  the  expenses  of  government,  no  tax 
upon  real  estate  for  state  purposes  being  necessary. 

Out  of  the  new  economic  situation  there  have  arisen  new 
functions  which  the  state  must  perform  and  new  methods 
have  been  devised  to  meet  the  new  demands.  Thus  in  the 
transition  from  an  agricultural  state  to  an  industrial  com- 
munity a  complete  new  system  of  taxation  has  been  evolved. 


CHAPTER  II 
Political  Factors 

The  fiscal  policy  of  a  state  is  not  only  affected  by 
fundamental  economic  conditions  but  is  also  modified 
by  the  rational  purposive  efforts  of  its  citizens.  The 
economic  conditions  determine  to  a  large  extent  what 
the  desires  of  the  people  will  be,  but  in  order  to  learn  how 
these  desires  have  been  fulfilled  we  must  study  the  political 
organizations  and  their  achievements.  In  a  state,  possess- 
ing diversified  industries,  social  classes  arise  with  diversi- 
fied aims  and  ambitions,  and  the  conflicts  between  these 
social  groups,  which  usually  take  the  form  of  political  party 
struggles,  result  in  the  ascendency  of  one  party  over  the 
other.  The  victorious  party  secures  control  of  the  legisla- 
ture and  inaugurates  the  fiscal  policy  which  it  desires. 

Any  attempt  to  determine  and  to  measure  the  influence 
exerted  by  any  single  political  party  upon  the  social  and 
fiscal  affairs  of  the  state  would  be  not  only  useless  but  unim- 
portant. Especially  would  such  a  study  be  inopportune  at 
the  present  time  of  political  and  social  unrest,  when  rigid 
adherence  to  party  policies  is  no  longer  practised.  No  one 
party  is  responsible  for  all  the  mistakes  that  have  been  made 
nor  is  any  one  party  responsible  for  all  the  achievements. 
The  usual  course  has  been  that  a  party  secures  control 
of  state  affairs  by  adopting  some  reform  measure;  this  re- 
form having  been  secured,  the  party  sooner  or  later  becomes 
corrupt  or  extravagant;  the  public  conscience  is  then 
aroused  by  the  heated  discussions  of  the  opposing  party  and 
28  [352 


353]  POLITICAL  FACTORS  29 

the  new  party  comes  into  power.  A  typical  case  of  this 
kind  occurred  with  the  advent  of  the  Whigs  to  power  in 
1837,  on  the  reform  platform  of  bank  regulation  and  con- 
trol. They  secured  the  passage  of  the  General  Banking  Act 
of  1838;  but  no  sooner  was  this  accomplished  than  they 
entered  upon  a  course  of  extravagant  expenditures  for 
canals  which  nearly  bankrupted  the  state.  In  1842,  the 
Democratic  party  came  into  power  and  secured  the  Consti- 
tution of  1846.  Cases  like  this  have  been  repeated  with 
monotonous  regularity  during  the  history  of  the  state. 

The  important  question  from  our  point  of  view  is  not 
what  political  party  made  the  contribution  to  the  state's 
progress,  but  rather  what  progress  has  been  made  and  how 
it  has  been  achieved. 

An  honest  and  impartial  survey  of  the  political  situation 
in  New  York  State  compels  one  to  admit  that  the  legisla- 
tures have  systematically  and  continuously  disregarded  the 
best  interests  of  the  people  of  the  state  and  that  progress  in 
efficient  government  has  been  secured  mainly  by  curbing 
the  powers  of  the  legislature  through  constitutional  amend- 
ments and  by  giving  the  average  citizen  a  larger  and  larger 
voice  in  the  management  of  public  affairs. 

Under  the  Constitutions  of  1777  and  1821  the  legisla- 
ture was  supreme.  It  was  unhampered  by  constitutional 
provisions,  and  furthermore  it  controlled  the  election  of 
most  of  the  administrative  officers.  The  only  administra- 
tive officers  elected  by  the  people  directly  were  the  Gover- 
nor and  Lieutenant-Governor.  The  other  state  officers  were 
first  appointed  by  the  Council  of  Appointments,  which  con- 
sisted of  one  Senator  from  each  senatorial  district,  and  later 
by  a  joint  committee  from  the  Senate  and  Assembly,  each 
committee  separately  appointing  one  person  for  each  of  the 
offices,  and  then  meeting  together  to  elect  them  by  joint 
ballot.     The  Treasurer  was  appointed  by  act  of  the  legis- 


30         FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [354 

lature  for  one  year  only,  but  he  could  not  be  a  member  of 
either  branch  of  the  legislature. 

There  were  practically  no  restraints  placed  upon  the 
powers  of  the  legislature  to  appropriate  public  money,  and 
the  custom  gradually  developed  of  granting  an  additional 
allowance  to  each  member  of  the  legislature  just  before  the 
close  of  the  session. 

In  order  to  understand  the  reason  why  the  legislature 
was  held  in  such  high  esteem  and  was  given  such  large 
power,  we  have  only  to  recall  the  role  which  it  played  in 
colonial  times.  In  the  royal  provinces,  the  chief  function 
of  the  legislature  was  to  oppose  the  Governor  in  his  at- 
tempts to  impose  taxes  upon  the  provinces.  No  taxes  could 
be  levied  without  the  consent  of  the  legislature  or  more 
especially  the  consent  of  the  lower  house.  The  legislature 
thus  stood  as  a  bulwark  against  harsh  and  arbitrary  exac- 
tions on  the  part  of  the  Crown. 

As  these  large  powers  later  came  to  be  abused,  a  remedy 
for  the  abuses  was  sought  in  the  adoption  of  new  consti- 
tutions from  time  to  time,  which  materially  curtailed  the 
powers  of  the  legislature.  The  Constitution  of  1821  con- 
tained the  following  provisions  for  controlling  the  legis- 
lature. 

A  limitation  was  placed  upon  the  compensation  to  legis- 
lators, the  maximum  being  fixed  at  $3  per  day.^  For  years  the 
legislators  included  a  section  in  the  annual  appropriation 
bill  which  gave  to  each  member  of  the  Senate  and  Assem- 
bly $1.50  per  day  for  each  day's  travel  and  attendance,  in 
addition  to  the  compensation  allowed  them  respectively  by 
the  act  entitled  "  An  Act  for  the  Support  of  the  Govern- 
ment." The  payment  is  noted  on  the  Comptroller's  books 
as    an    "  additional    allowance    to    the    Legislature,"    and 

1  Art.  i,  sec.  9. 


355]  POLITICAL  FACTORS  31 

amounted  to  from  one- fourth  to  one-fifth  of  the  regular  ex- 
penses/ 

The  provision  requiring  a  two-thirds  vote  on  bills  appro- 
priating public  money  was  evidently  intended  to  check 
abuses  which  had  grown  up  in  connection  with  the  incor- 
poration of  new  companies,  and  the  prevalent  custom  of  ex- 
tending relief  to  private  individuals  either  by  making  loans 
to  them  out  of  public  funds  or  by  canceling  obligations 
already  due  the  state.  In  1807,  out  of  a  total  of  184  laws, 
46  were  passed  incorporating  companies  and  38  were  for 
the  relief  of  private  individuals. 

Any  bill  might  originate  in  either  house  of  the  legisla- 
ture, and  all  bills  passed  by  one  house  might  be  amended 
by  the  other.^  The  assent  of  two-thirds  of  the  members 
elected  to  each  branch  of  the  legislature  was  required  for 
every  bill  appropriating  public  money  or  property  for  local 
or  private  purposes,  or  creating,  continuing,  altering  or  re- 
newing any  body,  politic  or  corporate.® 

The  proceeds  of  all  public  lands  sold  were  set  aside  as  a 
permanent  fund,  denominated  the  "Common  School  Fund." 
A  Canal  Fund  was  established  consisting  of  the  income 
from  rates  of  toll,  the  duties  on  salt,  the  auction  duties,  and 
from  a  tax  on  steamboat  passengers.  These  revenues  were 
inviolably  appropriated  and  applied  to  the  payments  of  in- 
terest and  capital  borrowed  or  to  be  borrowed,  and  were 
not  to  be  reduced  or  diverted  until  the  principal  and  inter- 
est of  this  debt  were  paid  in  full.  The  state  was  prohibited 
from  selling  or  disposing  of  the  salt  springs  or  canals.* 

1  In  1799  the  regular  expenses  were  $37,559,  and  the  additional  al- 
lowance $16,590.  In  1815,  regular  expenses  were  $59,376,  and  the 
additional  allowance  $17,590. 

'  Constitution  of  1821,  art.  i,  sec.  8. 

3  Ibid.,  art.  vii,  sec.  9. 

*  Ibid.,  art.  vii,  sec.  10. 


32  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [356 

No  lottery  should  ever  be  authorized  in  the  state  and 
the  legislature  was  authorized  to  pass  laws  preventing  the 
sale  of  all  lottery  tickets  within  the  state,  except  in  lot- 
teries already  provided  for  by  the  law/ 

The  Constitution  of  1821  also  extended  the  suffrage.  In 
1777,  the  right  of  suffrage  could  be  exercised  only  by  free- 
holders who  owned  property  worth  twenty  pounds  or  paid 
forty  shillings  a  month  rent  and  who  had  been  rated  and 
actually  paid  taxes  in  the  state.^  The  qualifications  for 
voters  under  the  second  constitution  were :  a  period  of  resi- 
dence, the  performance  of  military  service  and  the  payment 
of  road  taxes.  Negroes  were  required  to  own  and  to  have 
paid  taxes  upon  $250  worth  of  property. 

Constitution  of  1846 

The  Constitution  of  1846  extended  the  suffrage  to  every 
male  citizen  of  21  years  of  age  who  had  complied  with  the 
designated  residence  requirement.  It  also  made  the  more 
important  state  officers  elective  instead  of  allowing  them 
to  be  appointed  by  the  legislature. 

The  most  important  provisions  of  this  constitution,  how- 
ever, were  those  which  curtailed  the  power  of  the  legisla- 
ture to  incur  indebtedness  and  those  which  established  a 
financial  system  for  the  state. 

The  details  of  these  provisions  will  not  be  given  here,  as 
they  are  stated  in  full  in  a  succeeding  chapter  dealing  with 
the  canals. 

Constitution  of  i8p4 

The  Constitution  of  1894  still  further  restricted  the 
powers  of  the  legislature  with  regard  to  financial  affairs. 
The  financial  provisions  now  in  force  are  the  following : 

*  Constitution  of  1821,  art.  vii,  sec.  11. 

*  Constitution  of  1777^  art.  viii. 


357]  POLITICAL  FACTORS  33 

The  credit  of  the  state  cannot  be  given  or  loaned  to  aid 
any  individual  or  corporation/  The  state  may  contract 
debts  to  meet  casual  deficits  not  to  exceed  $1,000,000.^  Ad- 
ditional debts  may  be  contracted  in  case  of  war  or  insurrec- 
tion.^ 

No  debt  shall  be  contracted  without  imposing  a  tax  to 
pay  the  interest  and  principal  as  it  falls  due,  and  this  must 
be  sufficient  to  discharge  the  debt  within  50  years.  Every 
law  authorizing  the  contraction  of  such  a  debt  must  be  sub- 
mitted to  the  people  and  receive  a  majority  of  the  votes 
cast.  A  tax  so  imposed  remains  in  force  until  thi  money 
in  the  sinking  fund  is  sufficient  to  discharge  the  debt.*  Sink- 
ing funds  are  required  to  be  separately  kept  and  safely  in- 
vested and  the  funds  are  not  to  be  used  for  any  other  pur- 
pose.^ Claims  which  would  be  barred  by  lapse  of  time  are 
not  to  be  allowed  or  paid  by  the  state.®  The  lands  in  the 
forest  preserve  are  to  be  kept  as  wild  forest  lands.  ^ 

The  Erie,  Oswego,  Champlain,  Cayuga  and  Seneca  and 
Black  River  Canals  cannot  be  sold.^  Tolls  are  abolished. 
Canal  contracts  are  required  to  be  let  to  the  lowest  respon- 
sible bidder  and  no  extra  compensation  can  be  made  to  any 
contractor.^  Canal  improvements  may  be  paid  for  out  of 
bonds  or  by  the  appropriation  of  funds  from  the  treasury 
or  by  raising  the  money  by  an  equitable  annual  tax.^° 

If  current  revenues  are  sufficient,  the  contributions  to  the 
sinking  funds  may  be  made  out  of  current  revenues  in  the 
treasury,  in  which  case  no  direct  annual  tax  need  be  im- 
posed. " 

I  Constitution  of  1894,  art.  vii.  sec.  i.  2  jjjid.,  sec.  2. 
^Ibid.,  sec.  3.  ^  Ibid.,  sec.  4. 
B  Ibid.,  sec.  5.  e  Ibid.,  sec.  6. 
7  Ibid.,  sec.  7.  s  /^j^^  sec.  8. 
^  Ibid.,  sec.  9.  ^^  Ibid.,  sec.  10. 

II  Ibid.,  sec.  2,  adopted  1905. 


34  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [358 

Debts  for  highway  improvement  may  be  contracted  not 
exceeding  fifty  milHon  dollars  at  any  one  time.  Sinking 
fund  contributions  are  fixed  at  two  per  cent  per  annum.  The 
cost  may  be  distributed  proportionately  among  the  counties 
and  towns  benefited,  provided  no  county  shall  be  required 
to  pay  more  than  thirty-five  one-hundredths  of  the  cost  of 
any  highway  and  no  town  shall  be  required  to  pay  more 
than  fifteen  one-hundredths  of  the  cost.^  Under  a  referen- 
dum vote  under  article  vii,  section  4  of  the  constitution, 
$50,000,000  was  authorized  in  19 12  for  highways.  By 
this  means  the  amount  specified  in  article  vii,  section  12  has 
been  exceeded. 

The  capital  of  the  Common  School  Fund,  Literature 
Fund  and  United  States  Deposit  Fund  shall  be  preserved  in- 
violate. The  revenue  of  the  Common  School  Fund  is  to 
be  applied  to  the  support  of  the  common  schools,  that  of 
the  Literature  Fund  to  the  support  of  academies,  and 
$25,000  of  the  revenue  of  the  United  States  Deposit  Fund 
is  annually  transferred  to  the  capital  of  the  Common  School 
Fund.^ 

The  salaries  of  officers  which  are  fixed  by  the  constitu- 
tion cannot  be  changed.  The  salaries  of  other  state  officers 
shall  be  fixed  by  law  and  cannot  be  increased  or  diminished 
during  their  term  of  office.  They  cannot  receive  fees  or 
perquisites  of  office.^ 

The  indebtedness  of  counties,  cities,  towns  and  villages  is 
limited  to  ten  per  cent  of  the  assessed  valuation  of  the  real 
estate,  based  upon  the  last  assessment  rolls.  In  computing 
the  debt  limit,  revenue  bonds  issued  in  anticipation  of  the 
collection  of  taxes  are  not  to  be  included  when  they  are  to 
be  paid  out  of  the  proceeds  of  the  taxes  of  the  current  year. 

*  Art.  vii,  sec.  12,  adopted  1905.  ^  Art.  ix,  sec.  3. 

•  Art.  X,  sec.  9. 


359]  POLITICAL  FACTORS  35 

Revenue  bonds  of  the  City  of  New  York  to  be  redeemed 
out  of  the  tax  levy  of  the  next  succeeding  year  may  be  is- 
sued not  to  exceed  in  amount  one-tenth  of  one  per  cent  of 
the  assessed  valuation  of  the  real  estate.  Water  supply 
bonds,  for  a  term  not  exceeding  twenty  years,  are  not  in- 
cluded if  a  proper  sinking  fund  is  maintained.  Revenue 
bonds,  if  not  retired  after  five  years,  are  included. 

Debts  contracted  by  New  York  City  for  the  purpose  of 
investing  in  transit  facilities  or  docks  are  not  included  in 
computing  the  city's  debt  if  these  improvements  are  self- 
supporting,  i.  e.,  yield  a  net  revenue  sufficient  to  provide  for 
interest,  operation  and  maintenance  expenses  and  to  retire 
the  bonds  when  they  fall  due.^ 

The  movement  toward  curtailing  the  powers  of  the  legis- 
lature which  has  been  in  progress  for  a  century  has  at  last 
grown  to  such  proportions  that  the  people  are  now  attempt- 
ing to  take  even  the  power  of  making  laws  out  of  the  hands 
of  the  legislature.  The  present  agitation  for  the  initiative 
and  the  referendum  is  the  culmination  of  the  efforts  of  a 
century  to  secure  efficient  and  economical  government 
through  an  irresponsible  legislature. 

Another  method  has  been  tried,  especially  in  recent 
years,  to  secure  efficient  government,  viz.,  a  more  centralized 
control  over  all  state  activities.  This  method  of  control 
has  assumed  two  forms ;  first,  that  of  supervision  over  local 
authorities,  and,  second,  that  of  direct  state  administration. 
Under  the  former  method  of  control  are  the  reports  of 
local  authorities  to  state  boards,  such  as  annual  reports 
on  schools,  charities,  jails,  health  and  taxation.  This  is 
especially  important  in  the  management  of  state  finances. 
The  comptroller  can  issue  warrants  on  the  county  sheriff 
to  collect  the  corporation  tax  or  can  apply  to  the  court  to 

*  Art.  viii,  sec.  10. 


36         FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [360 

appoint  a  new  appraiser  in  collecting  the  inheritance  tax. 
The  supervision  over  the  administration  of  all  funds  and 
moneys  paid  into  courts  of  record  in  this  state  is  now  in 
the  hands  of  the  comptroller.  Great  benefit  will  come  from 
the  new  system  of  state  supervision  over  municipal  account- 
ing, which  will  put  the  system  of  municipal  accounting  on  a 
uniform  and  businesslike  basis. 

Under  the  latter  method  of  control  has  been  the  attempt 
to  secure  a  more  centralized  control  through  direct  state  ad- 
ministration, either  through  a  superintendent  elected  by  the 
people  or  through  a  commission  appointed  by  the  governor. 
The  prisons  and  canals  are  both  under  the  control  of  a  sup- 
erintendent appointed  by  the  governor,  and  charitable  and 
insane  institutions  are  controlled  by  commissioners  also  ap- 
pointed by  the  governor.  The  growth  of  commissions  has 
been  phenomenal  since  1880.  In  1883,  the  railroad  commis- 
sion and  civil  service  commissions  were  established,  and 
since  that  time  new  commissions  have  been  established  with 
nearly  every  change  of  administration,  until  to-day  well- 
nigh  every  activity  is  supervised  by  a  state  commission.  We 
now  have  the  departments  of  health,  labor,  excise  and 
weights  and  measures,  as  permanent  government  depart- 
ments. The  board  of  tax  commissioners  and  public  ser- 
vice commission  have  also  become  permanent  institutions. 
On  the  other  hand,  in  recent  years  a  large  number  of  com- 
missions have  existed  for  a  brief  time  to  carry  on  some  spec- 
ial investigation.  Among  these  are  the  employer's  liability 
commission,  the  food  investigation  commission,  the  com- 
mission to  investigate  port  conditions,  and  the  committee 
to  investigate  state  departments.  As  a  consequence  the  an- 
nual expenditure  for  commissions  organized  since  1880  is 
now  over  three  times  the  expenditure  for  the  administrative 
offices  of  the  state. 


CHAPTER  III 
Sale  and  Management  of  Public  Lands 

The  territory  included  within  the  boundaries  of  New 
York  State  to-day  is  practically  the  same  as  it  was  when 
the  state  entered  the  Union.  The  state  had  previously  been 
one  of  the  claimants  to  the  Crown  Lands  of  the  Northwest 
territory.  Her  claim  to  these  lands  was  based  chiefly  upon 
purchases  and  treaties  which  she  had  made  with  the  Six 
Nations  who  had  occupied  it.  In  1781,  by  her  delegates 
in  Congress,  she  ceded  her  claims  to  this  territory  to  the 
government  of  the  United  States,  being  the  first  state  in 
the  Union  to  make  cessions  of  lands  or  claims  of  lands. 
Her  concession  embraced  315  square  miles,  about  202,187 
acres,  now  occupied  by  Erie  County,  Pennsylvania.^ 

For  a  number  of  years  after  the  formation  of  the  Union, 
commissioners  were  at  work  establishing  boundaries  be- 
tween New  York  and  Massachusetts,  Connecticut  and  Ver- 
mont, which  were  in  dispute.  New  York  claimed  much  of 
the  territory  now  included  in  Vermont,  and  from  1777  to 
1789  Vermont  stubbornly  refused  to  acknowledge  the 
claims  of  New  York  and  succeeded  in  maintaining  an  inde- 
pendent government.^  In  1789,  an  agreement  was  reached 
whereby  Vermont  agreed  to  pay  the  sum  of  $30,000  to 
those  who  purchased  lands  from  the  New  York  govern- 
ment, and  thus  extinguished  all  rights  under  New  York 
titles. 

1  Donaldson,  Public  Domain,  p.  47. 
'  F.  A.  Wood,  Taxation  in  Vermont. 

361]  37 


38  FINANCIAL  HISTORY  OF  NEW  YORK  STATE     [362 

Lands  in  the  colony  of  New  York  before  the  Revolution 
were  generally  granted  with  the  reservation  of  a  certain 
rent  to  be  annually  paid  in  money  or  kind.  The  usual  rent 
charged  was  two  shillings  and  six  pence  on  every  one  hun- 
dred acres.  This  small  amount  was  originally  the  only 
pecuniary  consideration  given  to  the  government  for  the 
lands.  During  the  Revolutionary  War  the  collections  seem, 
in  great  measure,  to  have  been  suspended  and  little  revenue 
was  derived  from  this  source.  Modifications  of  this  system 
were  in  force  for  a  long  time  after  the  organization  of  the 
state.  Frequent  acts  providing  for  the  collection  and  com- 
mutation of  rents  were  passed  until,  in  1819,  all  the  useful 
provisions  of  the  former  acts  were  combined  into  one  act. 
This  made  the  settlement  very  easy.  Payment  of  60  per 
cent  of  the  arrears  and  commutations  would  release  the 
lands  and  the  rents  were  discharged  upon  all  lands  upon 
which  arrears  had  been  paid  up  to  18 14.  This  act  appro- 
priated the  amounts  received  from  commutations  and  quit 
rents  to  the  Common  School  and  Literature  Funds.  The  total 
payments  made,  from  the  close  of  the  war  down  to  1820, 
amounted  to  $295,702,  and  the  amount  still  due  was  $339,- 
000,  from  which  if  60  per  cent  were  deducted,  according  to 
the  act  cited  above,  there  would  remain  approximately 
$200,000  still  due  in  1820.^ 

The  homestead  laws  of  1 783-1 801  required  actual  settle- 
ment on  each  640  acres  to  be  made  within  seven  years.  By 
the  acts  of  1801,  1806,  and  1809,  the  time  was  extended 
seven,  ten,  and  ten  years  respectively  on  all  lands  bought 
prior  to  1801,  so  that  the  time  for  actual  settlement  was 
thus  extended  to  January,  1828. 

Early  in  the  history  of  the  state  the  policy  of  selling  off 
the  public  lands  was  adopted.     Lands  were  distributed  in 

*  Senate  Journal  1820,  p.  217. 


363]      SALE  AND  MANAGEMENT  OF  PUBLIC  LANDS        39 

this  way  in  a  lavish  manner.  Large  tracts  of  land  were 
secured  by  companies  which  opened  the  land  to  colo- 
nists and  reaped  large  fortunes  through  their  specu- 
lation. In  1786,  William  Cooper  opened  for  sale 
40,000  acres  of  land  in  Otsego  County  and  in  sixteen 
days  all  the  lands  were  sold.  To  the  west  of  Seneca 
Lake  1,000,000  acres  were  sold  to  the  Holland  Company. 
To  the  east  was  the  Military  tract  of  1,700,000  acres  set 
apart  by  New  York  to  pay  bounties  to  soldiers  of  the  Revo- 
lutionary War.  Under  a  law  passed  in  1791  to  sell  the 
public  domain,  there  were  sold  5,542,173  acres  of  land  for 
$1,030,433,  and  of  this  vast  domain  3,365,200  acres  went 
to  Alexander  McComb,  for  much  of  which  only  eight  pence 
an  acre  was  paid.  John  and  Nicholas  Roosevelt,  James 
Caldwell,  McGregor  and  others  secured  hundreds  of  thou- 
sands of  acres  at  prices  ranging  from  one  to  three  shillings 
per  acre.^ 

The  proceeds  from  the  sale  of  public  lands  were  an  im- 
portant source  of  revenue  for  only  a  few  years  in  the  early 
history  of  the  state  finances.  During  the  years  1790- 1795, 
they  amounted  to  about  fifty  per  cent  of  the  entire  state 
revenue,  the  year  1792  being  the  one  in  which  the  great- 
est amount  was  received,  when  $325,000  came  in  from 
this  one  source,  out  of  $559,500  received  from  all  sources. 
This  sum  was  not  set  apart  as  a  permanent  fund  but  was 
largely  consumed  in  meeting  the  ordinary  expenses  of  gov- 
ernment, some,  of  course,  being  invested  in  the  numerous 
state  activities. 

In  1805,  at  the  suggestion  of  Governor  Lewis,  500,000 
acres  were  set  apart  for  the  purpose  of  encouraging  educa- 
tion and  the  net  proceeds  from  the  sale  of  this  land  were 
to  constitute  a  permanent  fund  for  the  encouragement  of 

*  Hammond,  History  of  Political  Parties,  p.  58. 


40         FINANCIAL  HISTORY  OF  NEW  YORK  STATE     [364 

education.  The  money  received  from  the  sale  of  these 
500,000  acres  of  school  lands  was,  however,  recklessly- 
loaned  to  individuals  and  corporations,  who  failed  and  as  a 
consequence  the  school  fund  lost  $61,641. 

Of  the  29,000,000  acres  within  the  boundaries  of  the 
state,  there  remained  in  the  possession  of  the  state  in  1822 
only  991,659  acres,  and  these  were  turned  over  to  the  Com- 
mon School  Fund  to  be  sold  and  the  proceeds  to  constitute  a 
permanent  fund. 

The  sale  and  management  of  the  public  lands  was  con- 
ducted in  a  careless  manner.  An  inquiry  into  the  number 
of  mortgages  in  1804  showed  that  a  considerable  number 
were  unpaid,  that  others  had  been  paid  and  not  cancelled 
and  that  the  affairs  were  in  a  chaotic  condition.  Suits  had 
to  be  brought  against  the  commissioners  to  recover  the 
amounts  due  the  state.  Tracts  of  land  were  sold  to  which 
the  state  had  not  a  clear  title,  and  this  resulted  in  subsequent 
litigation  on  the  part  of  the  state. 

Perhaps  the  most  important  case  of  this  kind  was  the 
sale,  by  the  commissioners,  of  lands  acquired  by  J.  J.  Astor 
through  inheritance  from  relatives  and  which  by  1820  had 
been  occupied  by  seven  hundred  families  and  comprised  one- 
third  of  Putnam  County.  Mr.  Astor  agreed  to  compromise 
and  to  settle  his  claim  for  the  sum  of  $300,000  and  interest. 
The  state  preferred  to  go  to  law  with  him  and  to  make  him 
defend  his  title.  A  survey  of  the  claim  was  made  and  the 
51,000  acres  were  appraised  at  $678,638.  In  1827,  the 
commissioners  thought  it  could  be  settled  for  $350,000,  but 
the  state  continued  its  opposition  and  cases  were  tried  in 
the  circuit  courts  of  the  state  and  finally  carried  up  to  the 
Supreme  Court,  the  decision  in  every  case  being  in  favor 
of  Mr.  Astor.  As  a  result  of  this  litigation  the  state  paid 
over  to  Mr.  Astor  in  1833  state  stock  to  the  value  of  $561,- 


365]      ^^^^  ^^D  MANAGEMENT  OF  PUBLIC  LANDS        41 

500,  which  formed  the  nucleus  of  the  general  fund  debt  of 
the  state. 

In  addition  to  the  lands  which  were  sold  there  were  large 
tracts  of  land  in  Albany,  Rensselaer,  Columbia,  Delaware 
and  Schoharie  counties  which  were  held  by  the  descend- 
ants of  the  patrons  of  the  Dutch  colonial  period.  Tenants 
held  tracts  on  the  manorial  estates  under  perpetual  leases, 
and  as  late  as  1850  this  system  was  still  in  force  and  had 
important  results  upon  state  politics.  During  the  late 
forties  an  anti-rent  agitation  was  started  by  these  holders 
of  perpetual  leases ;  they  tried  to  impeach  the  title  of  their 
landlords  and  refused  to  pay  their  rent,  and  urged  on  by  un- 
scrupulous leaders  they  controlled  state  politics  for  several 
years.^ 

The  Onondago  Salt  Springs  were  ceded  to  the  state  in 
1795  by  the  Indians  for  $1,000  and  annual  royalties  of  $700 
and  150  bushels  of  salt,  and  by  each  succeeding  state  con- 
stitution this  land  has  been  declared  to  be  the  perpetual 
property  of  the  state. ^ 

The  Indian  tribes  owned  270,000  acres  in  18 19,  which 
were  scattered  about  over  the  state  in  different  reserva- 
tions. From  time  to  time  the  state  negotiated  treaties  with 
various  tribes,  whereby  it  secured  large  tracts  of  this  land, 
but  in  1880  the  Indian  reservations  still  contained  86,366 
acres. 

It  was  in  connection  with  the  sale  of  the  public  lands  that 
the  first  political  scandal  in  the  state  arose.  The  commis- 
sioners of  the  land  office  were  Governor  Clinton,  Secre- 
tary of  State  J.  A.  Scott,  Attorney-General  Aaron  Burr, 
Treasurer  Girard  Bancker,  and  Auditor  Peter  T.  Curtenius. 
Charges  were  made  that  Governor  Clinton  and  Aaron  Burr 

*  Democratic  Review,  vol.  xxviii,  p.  532. 
'  Ely,  Taxation  in  American  Cities,  p.  466. 


42  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [366 

were  personally  interested  in  the  sale  of  lands  and  had  agents 
employed  to  buy  lands  for  themselves.  A  legislative  inves- 
tigation failed  to  sustain  these  charges.  But  even  if  they 
did  not  reap  any  personal  advantage  it  was  certainly  the 
height  of  folly  to  allow  individuals  to  acquire  such  large 
tracts  and  to  sell  off  the  land  at  such  low  figures.  The 
needs  of  the  state  were  not  so  pressing  as  to  demand  forced 
sales  of  land  as  was  shown  by  the  large  surplus  revenue  in 
the  Treasury.  If  they  had  disposed  of  it  in  smaller  parcels, 
not  only  would  the  returns  have  been  greater,  but  a  more 
equal  distribution  of  land  would  also  have  resulted.  It  is 
true  that  the  state  ought  to  have  sold  the  land  cheaply  in 
order  to  attract  settlers,  but  the  state  could  have  established 
land  offices  quite  as  well  as  to  turn  this  over  to  colonizing 
companies  or  to  individual  promoters  who  reaped  most 
of  the  profits. 

This  was  but  the  first  chapter  in  the  story  of  irrespon- 
sible and  inefficient  administrative  and  legislative  control 
over  the  resources  of  the  state,  which  has  been  repeated 
with  monotonous  regularity  from  that  day  to  the  present 
time. 

During  the  period  from  1789- 1880,  the  policy  of  the  state 
was  to  dispose  of  all  of  her  lands  to  her  citizens.  The  lands 
were  sold  at  very  low  prices,  and  in  practically  un- 
limited quantities.  The  payments  for  land  purchased  were 
made  extremely  easy,  and  the  homestead  laws  were  liberal. 
The  state's  policy  was  to  own  only  so  much  land  as  was 
needed  for  public  buildings  and  other  public  purposes. 
Lands  acquired  through  the  non-payment  of  taxes  were  sold 
to  the  highest  bidder  at  auction  sale. 

In  1883,  the  state  adopted  a  new  policy.  It  prohibited 
the  further  sale  of  lands  which  it  owned  in  ten  Adirondack 
counties,  and  the  following  year  a  commission  was  ap- 
pointed to  report  on  a  system  of  forestry.     A  forest  com- 


367]      ^^^^  ^^^  MANAGEMENT  OF  PUBLIC  LANDS       43 

mission  was  established  in  1885,  and  715,262  acres  of  land 
were  placed  under  its  control.  The  same  year  $1,000,000 
in  bonds  were  issued  to  pay  the  awards  for  land  taken  for 
the  Niagara  State  Reservation.  These  bonds  bore  in- 
terest at  2^  per  cent,  and  the  last  $100,000  was  due  in 
1895,  but  owing  to  the  flourishing  condition  of  the  treasury 
the  final  payment  was  made  in  1893. 

The  first  appropriation  to  purchase  land  was  made  in 
1890,  when  $25,000  was  appropriated  to  buy  Adirondack 
land  at  not  more  than  $1.50  per  acre.  The  forest  preserve 
now  includes  all  lands  owned  or  acquired  by  the  state  in  the 
counties  of  Clinton,  Delaware,  Essex,  Franklin,  Fulton, 
Hamilton,  Herkimer,  Lewis,  Oneida,  Saratoga,  St.  Law- 
rence, Warren,  Washington,  Green,  Ulster,  and  Sullivan, 
except  lands  within  the  limits  of  any  village  or  city,  and 
lands  acquired  by  foreclosure  of  United  States  deposit  bond 
mortgages.  The  Adirondack  Park  consists  of  lands  owned 
by  the  state  in  Hamilton  county,  and  in  certain  enumerated 
towns  in  Essex,  Franklin,  Herkimer,  St.  Lawrence,  and 
Warren  counties.  The  Catskill  preserve  consists  of  lands 
owned  by  the  state  in  Green,  Ulster,  and  Sullivan  counties. 
This  land  is  to  be  forever  reserved  for  the  free  use  of  all 
people  for  their  health  and  pleasure,  and  as  forest  land  nec- 
essary to  the  preservation  not  only  of  the  head  waters  of 
the  chief  rivers  of  the  state  but  also  of  the  future  timber 
supply. 

The  effects  of  the  forests  on  the  water  supply  and 
of  denudation  upon  the  washing  of  soil,  have  now  be- 
come apparent.  The  shortage  of  wood  for  commercial  pur- 
poses has  also  stimulated  the  efforts  toward  conservation. 
A  desire  to  preserve  the  natural  beauty  of  the  Catskills  was 
the  chief  factor,  however,  which  led  to  the  acquisition  of 
the  Catskill  preserve.  In  19 12,  the  state  owned  1,495,581 
acres  in  the  Adirondack  preserve,  and  112,750  acres  in  the 


44  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [368 

Catskill  preserve.  The  area  of  the  proposed  Adirondack 
Park  in  3,313,564  acres,  and  that  of  the  Catskill  Park,  576,- 
120  acres.  Cornell  University  acquired  30,000  acres  in 
Franklin  county  at  a  cost  of  $165,000  in  1898  for  the  pur- 
pose of  studying  the  scientific  management  of  forests  under 
the  direction  of  its  Department  of  Forestry.  As  a  result, 
however,  of  disputes  and  litigation  over  the  use  made  of 
this  land  by  the  university,  the  land  was  returned  to  the 
forest  preserve  in  1912. 

In  1895,  the  forest  commission  and  the  fish  and  game 
commission  were  consolidated  into  the  fisheries,  game  and 
forest  commission.  In  19 12,  all  these  commissions  were 
consolidated  under  a  state  conservation  department. 

The  acquisition  of  the  forest  preserve  raised  the  question 
of  the  taxation  of  state  land  by  the  towns  and  counties  in 
this  region.  The  state  generously  adopted  the  plan  that  its 
lands  were  to  be  taxed  as  the  lands  of  private  individuals. 
If  the  taxes  levied  on  the  state  lands  exceeded  the  amounts 
due  the  state  from  the  counties,  the  comptroller  paid  the 
excess  to  the  county.  The  result  was  that  state  lands  were 
assessed  at  a  higher  valuation  than  similar  lands  of  a  resi- 
dent, and  other  devices  were  adopted  which  compelled  the 
state  to  bear  nearly  the  whole  burden  of  taxation.  From 
1886-1903,  the  acreage  of  state  lands  increased  228  per  cent, 
while  taxes  increased  510  per  cent.  The  taxes  levied  for 
the  year  1907  on  state  lands  aggregated  $117,076,  based  on 
an  assessment  of  1,442,209  acres  which  are  valued  at  $3,- 
253,000,  or  an  average  of  $2.25  per  acre.  There  were  wide 
discrepancies  in  the  assessments.  Some  lands  were  assessed 
as  low  as  $1  per  acre,  while  others  of  similar  quality  and 
situation  were  assessed  as  high  as  $6  per  acre. 

The  state  owns  a  number  of  smaller  parks  and  re- 
servations scattered  over  the  state,  most  of  which  have 
been  acquired  in  recent  years,  either  on  account  of  their 


369]      "S"^^^  ^^D  MANAGEMENT  OF  PUBLIC  LANDS       45 

historical  interest,  or  in  order  to  preserve  the  natural  beauty 
of  the  scenery.  Among  these  are  the  Senate  House  at 
Kingston,  Grant's  Cottage,  Washington's  Headquarters, 
Saratoga  Monument,  Lake  George  Battle  Ground,  Clinton 
House,  Sir  William  Johnson  Mansion,  and  John  Brown 
Homestead.  The  state  has  also  spent  considerable  sums  of 
money  in  erecting  monuments  to  the  memory  of  soldiers 
of  the  state  of  New  York  on  the  sites  of  old  battle-fields  of 
the  Civil  War,  as,  for  example,  at  Andersonville,  Antietam, 
Gettysburg  and  Lookout  Mountain.  Besides  the  Onondago, 
Salt  Springs  and  the  Indian  Reservation,  it  owns  reser- 
vations at  the  following  places:  Niagara,  St.  Lawrence, 
Stony  Point,  Watkins  Glen,  Cyprus  Hills,  Fire  Island, 
and  Saratoga  Springs.  Among  the  most  recent  addi- 
tions to  state  property  are  the  mountain  lands  along 
the  west  bank  of  the  Hudson,  known  as  the  Highlands 
of  the  Hudson.  The  Palisades  Interstate  Park  Commission, 
a  joint  commission  composed  of  members  from  both  New 
York  and  New  Jersey,  was  created  in  1900.  It  was  aided 
by  private  contributions  of  money  and  land,  in  addition  to 
the  $400,000  contributed  by  New  York  and  the  $50,000 
contributed  by  New  Jersey.  Mrs.  Harriman  has  given 
10,000  acres  of  land  situated  in  Rockland  and  Orange 
counties  for  park  purposes,  and  $1,000,000  to  administer 
this  trust.  Private  subscriptions  were  secured  from  resi- 
dents of  New  York,  Pennsylvania  and  New  Jersey  to  the 
amount  of  $125,000,  on  the  condition  that  the  state  appro- 
priate $2,500,000,  which  the  state  has  done. 

All  the  expenditures  for  the  acquisition  of  state  lands 
have  been  made  out  of  the  annual  income  of  the  state,  with 
the  exception  of  the  $1,000,000  issue  of  bonds  for  the 
Niagara  State  Reservation,  the  $950,000  issue  of  bonds  for 
the  Adirondack  park,  the  $2,500,000  recently  issued  for 
the  acquisition  of  the  Palisade  Interstate  Park,  and  $950,- 


46  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [370 

000  for/  the  Saratoga  Springs  State  Reservation.  There  are 
sev^^ral  objections  to  the  continuation  of  this  poHcy.  In 
view  of  the  heavy  demands  which  are  already  made  upon 
the  treasury,  it  will  be  almost  impossible  to  secure  adequate 
appropriations  to  extend  the  holdings  as  the  interests  of  the 
state  require.  Since  the  state  has  decided  upon  its  policy, 
it  should  be  promptly  executed  "  without  waiting  for  the 
values  to  increase,  and  without  risking  the  perils  of  further 
depredation."  ^  The  outlay  is  for  a  capital  investment  for 
the  benefit  of  the  people  of  the  state  for  all  time,  and  not 
in  any  sense  an  ordinary  expense  of  government,  and  it  is 
eminently  proper  that  its  cost  should  be  distributed  over  a 
long  period  of  years.  The  fund  should  be  provided  by  the 
creation  of  a  state  debt. 

There  is  every  reason  to  suppose  that  in  the  near  future 
the  revenues  from  the  forest  preserve  will  be  sufficient  to 
defray  all  the  expenses  connected  with  the  maintenance  of 
the  public  lands.  The  total  receipts  from  fines,  penalties, 
shell-fish  and  miscellaneous  items  amounted  to  $223,557  in 
1909.  The  total  expenditures  of  the  department  amounted 
to  $388,669.  The  forest,  fish  and  game  commission  has 
devoted  much  attention  to  reforestation;  in  1909,  i,- 
200,000  trees  were  planted.  In  Switzerland  the  annual 
net  profits  from  forest  land  is  from  eight  to  ten  dollars  per 
acre,  while  in  New  York  it  is  only  about  ten  cents  an  acre. 
By  some  amendment  to  the  constitution,  permitting  a  judi- 
cious cropping  of  the  forest,  the  state  may  acquire  a  large 
amount  of  revenue  from  the  forest  land.  It  already  has 
five  nurseries.  Several  private  companies  have  taken  up 
the  business  of  raising  trees  for  commercial  purposes,  and 
considerable  tree  planting  has  been  done  by  citizens  through- 
out the  state. 

^  Governor's  Message,  1910,  p.  11. 


371  ]      SALE  AND  MANAGEMENT  OF  PUBLIC  LANDS        47 

The  exact  amount  of  real  property  belonging  to  the  state 
is  not  known.  The  deeds  of  land  acquired  by  the  state  in- 
stitutions are  not  on  file  in  any  office  in  Albany/  An  inven- 
tory of  all  state  property,  including  lands  and  buildings, 
should  be  taken  at  once  and  some  central  office  should  be 
established  for  reporting  all  conveyances  to  and  from  the 
state.  This  is  especially  important  now  when  the  state  is 
about  to  attack  the  problem  of  water  storage  and  to  enter 
upon  other  enterprises  in  which  public  lands  will  be  con- 
stantly used. 

*  A.  R.  Comptroller,  1910,  p.  46. 


CHAPTER  IV 
The  Banking  System  ^ 

The  disastrous  experience  of  the  state  under  the  Colonial 
Banking  System,  with  the  excessive  losses  due  to  incon- 
vertible issues  of  paper  money  led  the  state  to  distrust  bank- 
ing in  all  its  forms.  Accordingly  among  the  first  acts 
passed  was  one  which  gave  a  monopoly  of  the  business  to 
the  United  States  Bank.^  In  spite  of  this  law,  the  Bank  of 
New  York  was  organized  in  1784,  but  was  not  granted  a 
charter  until  1791.  From  this  time  down  to  1838  every 
bank  charter  was  granted  by  a  special  act  of  legislature, 
and  for  the  next  two  decades  the  corruption  in  the  legisla- 
ture centered  around  the  granting  of  bank  charters.  The 
political  party  in  power  made  the  distribution  of  the  bank 
stock  a  part  of  the  spoils  of  victory,  and  in  order  to  secure 
to  itself  the  advantage  of  this  power,  it  became  necessary 
to  compel  all  banking  to  be  done  through  chartered  cor- 
porations. To  this  end,  laws  were  passed  in  1804  and  18 18 
which  effectively  prevented  private  banks  from  issuing 
notes. 

New  banks,  desirous  of  securing  charters,  resorted  to  all 
sorts  of  devices  to  gain  their  end.  Stock  was  distributed  to 
members  of  the  legislature  with  the  promise  of  an  imme- 
diate market  at  a  premium.  In  18 12,  Governor  Tompkins 
prorogued  the  legislature  on  the  ground  that  corrupt  prac- 

*  This  chapter  is  based  upon  Robert  Chaddock's  History  of  the  Safety 
Fund  Banking  System  in  New  York,  1829  to  1866. 
*Law  of  1782. 

48  [372 


373]  ^^^  BANKING  SYSTEM  49 

tices  had  been  employed  in  procuring  the  charter  of  the 
Bank  of  America.^  The  legislative  contests  were  between 
those  who  wished  to  enrich  themselves  by  securing  stock 
in  the  new  banks  and  those  who  were  already  stockholders 
in  existing  banks,  and  who  saw  in  the  incorporation  of  new 
banks  rival  powers  which  would  result  in  a  decrease  of 
their  own  profits.  "  Doubtless  the  clause  in  the  Constitu- 
tion of  1 82 1  which  required  a  two-thirds  vote  of  both 
houses  to  incorporate  a  monied  institution  was  adopted  to 
prevent  a  recurrence  of  such  disgraceful  proceedings.'*  *  A 
bonus  was  sometimes  demanded  by  the  legislature  in  return 
for  the  granting  of  the  charter,^  but  more  often  a  clause  in 
the  charter  gave  to  the  state  the  right  to  subscribe  to  a  cer- 
tain number  of  shares.  The  state  became  a  heavy  investor 
in  bank  stock,  sometimes  buying  the  stock  outright,  and 
sometimes  securing  it  as  a  gift.  In  1819,  the  state  had 
$996,800  of  its  funds  invested  in  twenty-five  different  banks. 
The  chief  concern  of  the  legislature  was  to  prevent  losses 
to  the  note  holders  through  bank  failures  or  through  depre- 
ciation of  bank  paper  by  over-issue.  How  to  accomplish 
this  was  learned  only  through  a  long  course  of  experience; 
each  new  charter  contained  some  fresh  provisions  designed 
to  correct  abuses  which  had  arisen.  The  results  of  past  ex- 
periences were  summarized  in  the  revised  statutes  of  1827. 
Among  these  we  find  limitation  of  the  bank  in  ownership 
of  real  estate  and  in  trading  in  goods  or  stock ;  certain  spe- 
cifications as  to  qualifications  and  election  of  directors;  the 
requirement  of  registration  for  a  valid  transfer  of  stock; 
the  regulation  of  total  debts,  exclusive  of  the  specie  actu- 
ally on  hand,  to  three  times  the  paid-up  capital  and  the  per- 

*  Hammond's  Hist.  Pol.  Parties,  vol.  i,  p.  337. 

2  Ibid.,  p.  337- 

'  Hist.  Safety  Fund  Bank,  p.  243. 


50         FINANCIAL  HISTORY  OF  NEW  YORK, STATE      [374 

sonal  liability  of  directors.  The  maximum  interest  rate  for 
short  loans  was  fixed  at  six  per  cent.^  Directors  were  pro- 
hibited from  paying  dividends  except  out  of  profits,  or  from 
paying  to  stockholders  any  part  of  the  capital  stock  or  from 
reducing  the  stock  without  the  consent  of  the  legislature; 
from  receiving  notes  of  stockholders  or  from  making  dis- 
counts in  payment  of  capital  stock;  from  receiving  from 
another  corporation  in  exchange  for  shares,  notes  and  bonds 
of  their  own  company,  shares,  notes  and  bonds  of  the  other 
company;  from  loaning  to  directors  amounts  more  than 
one-third  of  the  paid-up  capital ;  capital  was  required  to  be 
paid  in  full  before  a  charter  could  be  granted.^  The  state 
now  usually  reserved  the  right  to  modify  or  repeal  the  char- 
ters granted  but  no  satisfactory  method  of  distributing  the 
bank  stock  was  as  yet  devised. 

The  state  supervision  over  banks  was  far  from  complete, 
and  only  those  banks  whose  charters  contained  specific  pro- 
visions requiring  them  to  report  to  the  comptroller  made 
any  reports  whatever.  In  1827,  annual  reports  to  the  comp- 
troller were  required  to  be  made  under  oath  of  the  presi- 
dent and  cashier. 

The  following  table  shows  the  bank  charters  and  the  capi- 
tal authorized  from  1791  to  1825 :  ^ 

Period.  Charters  Granted.  Capital  Authorised. 

1791-1810 10  $7,430,000 

1810-1818 23  17,290,000 

1821-1825 10  4,300,000 

During  this  period,  eight  out  of  the  forty-three  banks 
failed.  This  was  not  a  bad  record,  but  other  abuses  ex- 
isted, such  as  the  issue  of  stock  notes  by  the  smaller  banks 

1  Hist.  Safety  Fund  Banking  System,  p.  244. 

2  Ibid.,  p.  253. 
*Ibid.,  p.  247. 


375]  THE  BANKING  SYSTEM  5 1 

whose  only  security  was  the  private  fortune  of  the  indi- 
vidual stockholders. 

Excessive  issues  of  these  were  made  without  adequate 
mean  to  redeem  them,  and  in  order  to  keep  notes  in  circu- 
lation banks  often  placed  obstacles  in  the  way  of  their 
prompt  redemption/  The  system  though  greatly  improved 
by  the  legislation  of  the  preceding  few  years  was  not  yet 
satisfactory,  and  in  1829,  when  twenty-nine  old  banks 
sought  renewal  of  their  charters,  it  was  deemed  advisable 
to  make  still  further  changes. 

SAFETY-FUND  BANKING  SYSTEM 

The  safety-fund  banking  scheme  was  suggested  by  Joshua 
Forman.  The  plan  was  suggested  for  the  purpose  of  se- 
curing the  note  holders  against  loss  through  the  failure  of 
a  bank  to  redeem  its  notes.  All  banks  of  the  state  were  to 
be  formed  into  an  association,  and  each  bank  was  to  con- 
tribute not  more  than  one-half  per  cent  of  its  capital,  yearly, 
to  a  fund  which  was  to  be  used  in  redeeming  notes  and 
paying  off  debts  of  failed  banks.  These  contributions  were 
to  continue  until  each  bank  had  paid  in  three  per  cent  of 
its  capital  and  any  diminution  of  the  fund  was  to  be  made 
good  by  additional  contributions  of  one-half  per  cent  per 
year  and  by  contributions  of  the  assets  of  failed  banks. 
The  fund  was  to  be  invested,  and  the  revenue  apportioned  as 
dividends  aniong  the  associated  banks.  Three  commission- 
ers were  appointed,  one  by  the  governor  and  two  by  the 
banks,  to  investigate,  examine  and  supervise  the  banks,  and 
to  see  that  they  conformed  to  law.  After  1837,  all  com- 
missioners were  appointed  by  the  governor  and  senate. 

The  plan  was  opposed  by  the  New  York  City  banks,  and 
for  a  time  they  refused  to  accept  charters  under  the  new 
system.    The  city  banks  objected  to  a  tax  upon  their  capital, 

1  Ibid.,  p.  250. 


52  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [376 

since  they  were  largely  banks  of  deposit  and  discount,  and 
their  use  of  notes  was  more  restricted — they  kept  in  circu- 
lation less  than  one-third  of  the  amount  of  their  capital — 
whereas  country  banks  kept  the  full  amount  allowed  by 
law,  namely,  twice  the  paid-up  capital.  It  was  felt  that  the 
sound  and  conservative  city  banks  were  being  taxed  to 
support  badly-managed  country  banks.  It  was  admitted 
that  the  law  was  not  so  favorable  to  the  city  banks  as  to  the 
country  bank,  but  it  was  considered  the  best  that  could  be 
adopted  under  the  circumstances,  and  that  it  was  an  im- 
provement over  the  existing  system. 

It  will  not  be  possible  to  go  into  the  details  of  the  actual 
workings  of  the  system.  Two  main  difficulties  may  be 
mentioned  in  passing.  Banks  in  the  country  were  not  re- 
quired to  redeem  their  notes  except  at  their  own  counters. 
They  did  not  depend  upon  specie  in  their  own  vaults,  but 
kept  funds  in  the  city  banks  and  redeemed  their  paper  by 
drafts  on  the  city.  In  1834,  the  city  banks  stopped  taking 
up  their  notes  and  sending  them  home.  In  1839,  the  sys- 
tem became  so  deranged  that  discounts  on  country  notes 
ranged  as  high  as  6  per  cent.  To  remedy  this,  a  law  was 
passed  requiring  all  banks  outside  the  city  to  appoint  an 
agent  and  open  an  office  in  New  York  or  Albany  for  the 
redemption  of  their  notes  at  not  more  than  one-half  per  cent 
discount.  This  figure  was  still  considerably -greater  than 
the  expenses  of  redemption  and  a  large  number  of  banks 
engaged  in  the  business  of  shaving  notes,  until  the  rate  was 
reduced  to  one-fourth  per  cent  discount,  which  just  covered 
the  expense  of  redemption,  and  drove  these  banks  out  of 
business.  The  second  evil  arose  over  the  distribution  of 
bank  stock.  The  banking  business  was  lucrative  and  the 
wave  of  speculation,  which  culminated  in  the  crisis  of  1837, 
was  at  its  height  in  1836.  Banks  were  organized  by  men 
without  capital,  who  were  anxious  to  engage  in  speculation. 


377]  ^^^  BANKING  SYSTEM  53 

While  the  law  limited  the  number  of  shares  one  person 
could  purchase,  it  was  evaded  by  transferring  shares,  so 
that  sooner  or  later  a  majority  of  the  stock  was  held  by  a 
few  persons.  In  one  case,  out  of  500  original  subscribers, 
97  actually  received  stock  in  the  first  distribution.  After 
the  transfer  of  the  stock  had  taken  place,  there  were  only 
36  holders  of  stock,  and  7  men  held  7,659  shares  out  of 
the  total  of  12,000.^  The  law  of  1837  remedied  these 
evils  of  distribution  by  regulating  the  size  of  shares,  by  pro- 
viding for  advertisement  of  sale  at  public  auction,  and  by 
guarding  against  transfers  of  stock  in  other  ways. 

The  system  was  put  to  a  severe  test  during  the  panic  of 
1837.  There  was  a  sudden  demand  for  specie  for  export. 
Specie  was  withdrawn,  followed  by  a  run  on  city  banks, 
which  completed  the  panic,  and  specie  payment  was  sus- 
pended in  New  York  City  on  May  loth.  This  would  by 
law  have  worked  the  revocation  of  the  charters  had  not 
prompt  action  been  taken  by  the  legislature.  "  The  suspen- 
sion was  not  due  to  defects  in  the  organization  of  banks," 
according  to  the  commissioners,  "  but  was  an  incident  to 
their  connection  with  the  commercial  interests  of  the  coun- 
try." ' 

The  first  call  upon  the  safety  fund  was  made  in  1837  to 
pay  the  debts  of  three  defunct  banks  in  Buffalo.  Two  other 
banks  had  their  charters  repealed  for  violation  of  the  bank- 
ing laws  during  the  same  year,  but  the  serious  failures  did 
not  begin  until  1840.  During  the  years  1840  to  1842  eleven 
banks  failed.  The  causes  of  failure  were  three:  an  imper- 
fect system,  lack  of  moral  responsibility  on  the  part  of  the 
officers  and  directors  to  stockholders,  and  laxity  on  the  part 
of  bank  commissioners.     Under  the  heading  of  an  imper- 

^  Safety  Fund  Banking  System,  p.  287, 
^  Ibid.,  p.  300. 


54  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [378 

feet  system,  must  be  mentioned  the  plan  of  distributing 
stock,  as  well  as  the  manner  of  securing  a  charter ;  the  lack 
of  a  system  of  registering  the  notes  issued  to  prevent  illegal 
issue;  the  use  of  funds  by  bank  officers;  the  toleration  of 
the  practice  of  hypothecation  of  the  bank's  own  notes  as 
security;  too  large  loans  to  individuals,  and  often  on  in- 
sufficient security;  and  finally  no  definite  specie-reserve  re- 
quirement. Banks  were  too  often  managed  by  unscrupulous 
men,  who  were  interested  primarily  in  the  speculative  side 
of  banking.  Loans  were  concealed  and  false  statements 
made.  Charges  of  political  influence  in  appointment  and 
incompetency  on  the  part  of  commissioners  were  made. 
The  comptroller,  writing  in  1848,  says:  *' The  place  was 
sought  for,  and  conferred  upon  partisan  aspirants  without 
due  regard  to  qualifications  to  discharge  the  delicate  trust 
committed  to  them."  ^  If  true,  this  may  account  in  part  for 
the  fact  that  some  bad  practices  were  overlooked;  but  it 
may  be  said  that  for  the  most  part  the  commissioners  were 
probably  deceived  as  to  the  correctness  of  the  bank  state- 
ment, and  were  powerless  to  prevent  the  bad  practices.  The 
office  of  commissioner  was  abolished  in  1843. 

When  this  great  demand  was  made  upon  the  fund,  the 
comptroller  was  forced  to  demand  the  one-half  per  cent  ad- 
ditional contribution,  which  the  law  allowed,  to  replenish  it, 
and  every  solvent  bank  was  forced  to  pay  this  additional 
contribution  as  long  as  its  charter  lasted.  Solvent  banks 
were  allowed  to  commute  these  annual  contributions  for 
the  next  four  or  five  years  in  notes  of  insolvent  banks  on 
which  they  were  allowed  interest  at  7  per  cent  on  the 
amounts  commuted,  until  these  would  have  been  regularly 
due.  Sixty-four  banks  took  advantage  of  this  provision 
and  paid  in  $477,609  in  notes  of  failed  banks.     The  total 

*  A.  R.  Comptro'  er  1848,  p.  51. 


379]  ^^-E  BANKING  SYSTEM  55 

contributions  from  the  solvent  banks  from  1830  to  1866 
amounted  to  $3,119,999. 

The  total  number  of  banks  existing  at  any  one  time 
under  the  safety-fund  system  was  91.  The  fund  amounted 
to  $119,342  in  1841,  but  of  this  amount  one-third  was  re- 
quired by  law  to  be  kept  for  the  payment  of  other  debts 
than  the  redemption  of  notes.  The  amount  paid  out  in  re- 
deeming notes  was  $1,615,302  and  for  other  debts,  $1,088,- 
109;  while  the  receipts  from  assets  of  failed  banks  paid  into 
the  fund  amounted  to  only  $138,077,  so  that  the  final  bur- 
den upon  the  safety  fund  was  $2,565,334. 

In  1842,  it  was  recognized  that  the  fund  could  not  secure 
all  the  debts  of  failed  banks,  and  it  was  accordingly  provided 
that  the  fund,  after  paying  all  liabilities  already  incurred  by 
bank  failures  should  be  applied  only  to  the  payment  of  notes. 
If  originally  the  fund  had  been  liable  for  notes  only  it  would 
have  proven  ample  indemnity  for  the  note  holders.  As  it 
actually  happened,  however,  during  the  years  1840  to  1845, 
when  the  fund  could  not  meet  all  the  demands  made  upon 
it  for  redemption,  great  losses  were  caused  to  note  holders 
due  to  depreciation.  The  amount  is  estimated  at  from  20 
to  25  per  cent.  In  1845,  the  state  came  to  the  assistance 
of  the  fund  by  authorizing  an  issue  of  6  per  cent  state 
stock,  and  by  1849,  the  state  had  issued  $900,829  of  stock. 
This  was  made  a  charge  on  the  bank  fund,  and  it  was  re- 
deemed as  fast  as  convenient  from  the  contributions  made 
by  the  solvent  banks.  The  bank  fund  became  mortgaged 
to  the  full  extent  of  all  future  contributions  due  it,  so  that 
creditors  of  banks  which  failed  after  1842  could  not  de- 
pend upon  the  fund  for  redemption  of  notes  or  the  payment 
of  other  debts.  The  fund  was  responsible  for  notes  only, 
but  even  these  note  holders  could  not  be  reimbursed  until 
the  state  stock  had  been  redeemed,  and  if  there  then  re- 
mained a  surplus,  their  notes  might  be  redeemed.     The 


56  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [380 

Constitution  of  1846  made  notes  the  first  claim  on  the 
assets  of  an  insolvent  bank,  and  made  stockholders  liable  to 
the  amount  of  their  stock  for  debts  of  banks  contracted 
after  1850.  It  is  clear,  then,  that  the  only  hope  of  pay- 
ment to  creditors  lay  in  the  first  claim  upon  assets,  and  in 
the  liability  of  stockholders.  The  first  safety-fund  bank  to 
fail  after  1842  was  the  Canal  Bank,  which  failed  in  July, 
1848.  The  next  was  the  Lewis  County  Bank  in  1854,  and 
during  the  panic  of  1857  three  others  failed,  namely,  Bank 
of  Orleans,  Reciprocity  Bank  and  Yates  County  Bank. 
The  notes  of  these  banks  depreciated  and  before  the  fund 
became  available  most  of  them  disappeared. 

In  1866,  when  the  last  charter  under  the  safety-fund 
system  expired,  all  claims  upon  the  funds  for  debts  con- 
tracted by  failed  banks  prior  to  1842,  and  for  the  state  stock 
issued  in  1845  ^^^  following  years  had  been  paid,  and  a  sur- 
plus of  $88,048  remained.  A  dividend  of  40  per  cent  was 
declared  on  the  outstanding  circulation  on  the  insolvent 
banks  whose  notes  had  not  been  fully  paid.  So  few  notes 
were  presented  for  redemption  that  the  fund  was  ample  to 
pay  in  full  all  the  notes  which  were  presented,  and  after 
paying  these  there  still  remained  a  surplus  of  $13,144. 
This  balance  was  paid  into  the  treasury.  Out  of  this,  $3,959 
was  refunded  to  the  Bank  of  Oswego  for  an  erroneous  pay- 
ment made  in  1842.  The  failure  of  the  safety-fund  system 
was  due  not  to  the  principle  but  chiefly  to  the  attempt  to 
charge  it  with  all  debts.  In  1829,  the  chief  losses  had  been 
suffered  by  note  holders,  and  the  primary  object  of  the  law 
was  to  make  bank  notes  a  safe  universal  currency.  With 
this  the  state  could  have  stopped,  because  as  the  comptroller 
said  in  1849,  "  The  state  was  under  no  more  obligation  to 
attempt  the  impossibility  (that  is,  to  secure  against  all 
losses)  than  it  would  be  the  equally  absurd  one  of  making 
every  merchant  capable  of  meeting  all  the  obligations  he 
should  incur." 


28i]  THE  BANKING  SYSTEM  57 

As  a  matter  of  fact  the  fund  would  have  been  sufficient 
to  redeem  all  notes  issued,  but  the  charge  for  redemption 
would  have  been  greatly  decreased  if  fraudulent  overissues 
had  been  prevented  by  a  registration  requirement,  as  was 
later  done.  The  total  illegal  issues  of  two  Buffalo  banks 
amounted  to  $252,647,  which  became  a  charge  upon  the 
fund. 

SECURITY-DEPOSIT  SYSTEM 

The  adoption  of  the  security-deposit  system  of  banking 
under  a  general  banking  law  was  not  due  to  a  failure  of  the 
safety-fund  system,  because  in  1838  nothing  had  been  lost 
on  notes  issued  during  the  nine  years  of  its  existence.  The 
chief  point  of  opposition  was  found  in  the  growing  hatred 
of  the  monopolistic  character  of  the  banking  business.  It 
was  felt  that  whatever  advantages  were  to  be  derived  from 
the  banking  business  should  be  free  to  all  citizens  alike. 
The  deposit  business  was  now  attaining  considerable  pro- 
portions and  while  the  principle  of  protection  to  the  note 
holder  was  admitted,  the  monopoly  of  the  deposit  and  dis- 
count business  was  strongly  oppnDsed.  Comptroller  Flagg, 
in  1836,  advocated  allowing  banks  of  deposit  and  discount 
without  the  power  of  note  issue,  and  Gallatin  opposed  re- 
strictions on  deposit  and  discount  by  private  bankers.  A 
new  party  came  into  power  in  1838,  and  influenced  by  the 
widespread  spirit  of  opposition  to  monopolies  it  undertook 
the  inauguration  of  a  new  banking  system. 

The  law  of  1838  was  the  result.  It  required  a  specie  re- 
serve of  I2j4  per  cent.  Banks  and  corporations  possessing 
a  paid-up  capital  of  $100,000  could  be  incorporated  and 
receive  notes  from  the  comptroller  on  depositing  stock  of 
the  state,  United  States,  or  other  states,  or  bonds  and  mort- 
gages of  a  specified  sort.  From  1838  to  1849,  thirty-one 
banks  failed  and  were  closed  by  a  sale  of  securities  which 


-8  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [382 

had  been  pledged  with  the  comptroller;  in  most  of  these 
cases  the  proceeds  of  the  securities  were  insufficient  to  re- 
deem the  entire  circulation,  and  therefore  a  pro-rata  divi- 
dend was  paid  to  the  bill-holder,  and  certificates  issued  for 
the  balance,  payable  out  of  the  additional  means  which  the 
banks  may  have  possessed.  Note  holders  lost  under  this 
system,  owing  to  the  depreciation  of  securities.  New  York 
stocks  averaged  as  low  as  88  >^  per  cent  normal  value,  stocks 
of  other  states  from  49  per  cent  to  73  per  cent  of  their 
normal  value,  while  bonds  and  mortgages  averaged  70  per 
cent.  After  a  few  years'  experiences  the  defects  of  this  law 
were  remedied,  and  state  stocks  of  other  states  and  bonds 
and  mortgages  were  abandoned  as  security.  In  place  of 
these,  other  suitable  securities  were  found  in  the  stocks 
issued  by  cities.  The  loss  of  the  note  holders  in  the  case 
of  these  free  banks  was  about  39  per  cent.  There  had  oc- 
curred 29  failures  in  the  seven  years  since  the  inauguration 
of  the  system,  as  against  11  failures  in  the  sixteen  years' 
existence  of  the  safety-fund  system.  Nevertheless,  under 
the  provisions  of  this  act,  new  banks  were  continually  incor- 
porated, so  that  in  1850  there  existed  73  banks  under  the 
safety-fund  system,  and  136  under  the  general  banking  act. 
As  charters  of  the  safety-fund  banks  expired,  they  reor- 
ganized under  the  general  banking  act. 

The  banks  were  required  to  make  quarterly  returns  to 
the  comptroller,  but  the  duties  connected  with  this  depart- 
ment grew  so  rapidly  that  in  1851  a  banking  department 
was  established,  and  reports  were  henceforth  made  to  the 
superintendent  of  this  department. 

Under  the  bond-deposit  system,  which  required  a  dollar- 
for-dollar  deposit  of  securities,  a  large  portion  of  the  capi- 
tal was  beyond  the  control  of  the  banks.  When  there  was 
a  demand  for  currency,  it  often  became  necessary  to  with- 
draw securities,  and  to  increase  the  cash  reserve  for  the 


383]  ^^^  BANKING  SYSTEM  59 

purpose  of  redeeming  notes.  Thus  at  the  very  time  when 
money  was  needed  there  resulted  a  contraction  of  the  cur- 
rency. In  a  word,  the  system  was  very  inelastic,  whereas, 
on  the  other  hand,  the  safety-fund  system  was  highly  elastic, 
because  currency  could  be  issued  upon  general  assets,  and 
the  amount  of  currency  issued  corresponded  closely  with 
the  demands  of  business. 

The  difference  is  well  illustrated  during  the  period  1838 
to  1866,  when  the  two  systems  existed  side  by  side.  The 
extreme  range  of  seasonal  variation  of  the  demand  for  cur- 
rency for  the  safety-fund  banks  was  $536,000,  whereas  for 
the  bond-deposit  banks  it  was  $290,000.^ 

The  bond-deposit  system  principle  was  later  adopted  by 
the  Federal  Government  when  it  established  a  national  bank- 
ing system  after  the  Civil  War.  The  principle  of  the  safety- 
fund  system  is  being  tried  again  to-day  in  some  of  the  west- 
em  states,  as,  for  example,  Oklahoma.  These  states  would 
do  well  to  study  New  York's  experiences  and  profit  by  its 
mistakes. 

*  Hist,  of  the  Safety  Banking  System,  p.  345. 


CHAPTER  V 

Internal  Improvements/    Part  I 

The  undertaking  of  the  Erie  Canal  in  1817  was  not  a 
new  and  untried  venture  contrary  to  the  traditions  of  the 
state,  but  was  quite  in  harmony  with  its  previous  policy. 
The  state's  limited  experience  with  the  Western  Inland 
Lock  Navigation  Company,  which  it  aided  by  taking  shares 
and  loaning  funds,  had  shown  the  possibilities  of  reducing 
the  cost  of  transportation  by  means  of  canals.  During  the 
five  years  from  1791  to  1796,  the  cost  of  transporting  a  ton 
from  Schenectady  to  Seneca  Falls  had  fallen  from  $75.00 
to  $32.00.  There  were  two  main  reasons  why  the  state 
should  construct  the  canals:  (i)  to  cheapen  the  cost  of 
transportation,  and  (2)  to  secure  to  the  state  the  advan- 
tages of  increased  commerce.  The  settlers  along  the  pro- 
posed route  were  eager  for  it  because  it  meant  a  reduction 
in  the  cost  of  marketing  their  crops  from  $32,  which 
was  then  the  cost  of  conveyance  by  land,  to  $1.00  per  ton. 
They  could  market  their  crops  and  receive  a  return  sev- 
eral times  greater  than  under  the  old  conditions.  In 
this  connection  it  is  interesting  to  note  that  their  hopes 
were  not  doomed  to  disappointment,  for,  in  1823,  the  canal 
commissioners  reported  that  the  price  of  wheat  in  the 
region  west  of  the  Seneca  river  had  increased  50  per  cent 
In  the  second  place,  the  gain  from  increased  commerce  was 
a  most  important  consideration,  and  it  is  precisely  this  point 
that  advocates  of  canal  enlargement  urge  so  strongly  at  the 

*  This  chapter  is  based  upon  the  History  of  New  York  Canals  found 
in  Assent.  Doc.  1906,  vol.  5. 

60  384 


385]  INTERNAL  IMPROVEMENTS  6 1 

present  time.  To-day,  as  in  the  year  181 6,  there  is  the  fear 
that  trade  will  be  diverted  northward  to  Montreal  and  the 
St.  Lawrence.  In  18 16,  a  barrel  of  flour  could  be  trans- 
ported from  Cayuga  to  Montreal  for  $1.50,  whereas  it  cost 
$2.50  to  convey  it  to  Albany;  to-day  the  cost  of  transport- 
ing wheat  from  Chicago  to  New  York  is  eleven  cents  a 
bushel,  whereas  the  cost  from  Chicago  to  Montreal  is  about 
five  cents  per  bushel.  The  construction  of  the  Erie  Canal 
gave  to  New  York  the  great  mass  of  the  trade,  and  there 
is  every  reason  to  suppose  that  by  increasing  her  facilities 
and  reducing  the  cost  she  may  again  secure  a  large  amount 
of  this  traffic. 

The  idea  of  a  canal  had  been  suggested  by  Washington 
and  William  Cooper  as  early  as  1785,  and  other  travelers 
and  statesmen  declared  it  to  be  practicable.  A  survey  of 
the  route  was  made  in  1808,  but  nothing  further  was 
done  until  after  the  War  of  18 12,  and  even  then  the  matter 
w^as  not  undertaken  until  the  election  of  DeWitt  Clinton 
as  governor  in  18 16.  Five  commissioners  were  appointed 
to  take  up  the  matter  of  completing  the  canals  and  to  report 
to  the  next  legislature.  On  April  17,  18 17,  an  act  was 
passed  providing  for  a  canal  to  connect  the  waters  of  the 
Hudson  River  with  those  of  Lake  Erie,  and  the  five  com- 
missioners previously  appointed  were  denominated  the  canal 
commissioners,  and  were  authorized  to  borrow  money  on 
the  credit  of  the  state  and  were  given  other  powers  neces- 
sary for  carrying  on  the  work.  Even  at  this  early  day  men 
of  large  vision  and  keen  business  insight  were  not  lacking 
in  this  state,  and  J.  R.  Rensselaer  proposed  to  the  legisla- 
ture that  he  construct  the  whole  canal  on  the  plan  contem- 
plated by  the  commissioners  for  $10,000,000,  or  that  he 
construct  it  for  $7,500,000  and  receive  the  tolls  for  20  years 
after  one-quarter  of  the  canal  was  completed. 

The  project  was  by  many  considered  a  ruinous  experi- 


62  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [386 

ment,  and  fearful  lamentations  issued  from  the  Capitol 
over  the  miseries  of  an  over-taxed  posterity.  Nowhere, 
however,  does  one  find  a  trace  of  opposition  on  the  ground 
that  the  state  would  be  thus  interfering  with  the  rights  of 
private  industry.  At  this  early  date  it  was  both  to  public 
and  private  advantage  for  the  state  to  construct  the  canals, 
because  it  alone  could  finance  such  a  large  undertaking,  and 
furthermore  there  were  sufficient  openings  elsewhere  for  all 
the  available  capital  that  private  individuals  possessed.  At 
the  present  time  private  capital  has  accumulated  to  such  an 
amount  that  it  needs  every  opportunity  to  invest  this  sur- 
plus, and  hence  the  changed  economic  conditions  have 
brought  about  a  changed  attitude  on  the  part  of  the  people 
towards  state-conducted  industries. 

The  financial  plan  for  the  management  of  the  canal  was 
worked  out  by  George  Tibbits,  a  member  of  the  joint  com- 
mittee and  a  senator  from  Rensselaer  County,  and  it  was 
practically  his  plan  that  was  embodied  in  the  law  of  181 7. 
The  law  provided  for  a  canal  fund  of  which  all  the  officers 
of  the  state  except  the  governor  were  to  be  commissioners. 
The  fund  consisted  of  the  proceeds  from  a  tax  of  twelve 
and  one-half  cents  a  bushel  on  salt  manufactured  in  the 
state,  duties  on  goods  sold  at  auction,  a  tax  on  steamboat 
passengers,  tolls  from  the  canal,  grants  and  donations,  and 
a  tax  on  real  estate  located  within  a  distance  of  twenty- 
five  miles  from  the  canal.  This  last  provision  was  adopted 
in  lieu  of  local  taxation  levied  upon  the  real  estate  and 
personal  property  in  villages,  towns,  cities  and  counties 
immediately  to  be  benefited  by  the  canal,  which  had  been 
voted  down.  In  1820,  the  question  of  collecting  this  tax 
was  discussed,  but  no  action  was  taken,  and  no  collection 
was  ever  made.  Thus  the  first  attempt  of  the  state  to 
raise  funds  by  what  was  virtually  a  special  assessment 
failed.    In   1820,  the  state  took  over  the  stock  of  the 


387]  INTERNAL  IMPROVEMENTS  63 

Western  Inland  Lock  Navigation  Company,  which  ac- 
cepted the  sum  of  $91,616  for  its  shares  of  the  stock 
which  was  not  owned  by  the  state.  Grants  of  land 
were  also  made  to  the  fund  by  corporations  and  indi- 
viduals as  follows:  The  Holland  Land  Company,  100,623 
acres  in  Cattaraugus  County,  on  condition  that  the  canal  be 
completed  for  boats  of  at  least  five  tons  burden;  Governor 
Hornby,  3,500  acres;  Bayard  and  McEves,  2,500  acres; 
Gideon  Granger,  1,000  acres,  and  56  persons  contributed 
smaller  amounts.  Application  for  aid  was  made  to  the 
United  States  and  to  neighboring  states  on  the  ground  that 
they  would  be  benefited  by  the  canal,  but  no  sums  were  ob- 
tained in  this  way.  In  spite  of  these  provisions,  chief  re- 
liance was  placed  upon  loans,  and  during  the  years  1817  to 
1825,  the  state  borrowed  $7,896,150  for  this  purpose. 

The  work  once  started  proceeded  rapidly,  and  as  soon  as 
each  section  was  completed  it  was  opened  to  traffic ;  the  first 
tolls  collected  in  1821  amounted  to  $2,200,  but  by  1830  they 
exceeded  a  million  dollars.  On  October  26,  1825,  the  entire 
Erie  Canal,  363  miles  in  length,  was  completed  and  the 
first  boat  from  Buffalo,  bearing  the  governor,  DeWitt  Clin- 
ton and  other  officials,  arrived  at  Albany  in  November. 
Clinton  was  the  hero  of  the  hour,  and  the  people  gave  them- 
selves up  to  unrestrained  enthusiasm  on  this  great  occa- 
sion; festivities,  celebrations,  banquets,  and  grand  balls 
were  held  in  all  the  villages  along  the  route  and  in  the  larger 
cities  throughout  the  state.  The  Albany  Daily  Advertiser, 
of  November  4th,  in  speaking  of  Clinton's  arrival  at  Al- 
bany, says :  "  The  thunder  of  cannon  proclaimed  that  the 
work  was  done,  and  the  assembled  multitude  made  the 
welkin  ring  with  shouts  of  gladness.  It  was  not  a  monarch 
which  they  hailed,  but  it  was  the  majesty  of  genius  sup- 
ported by  a  free  people  that  rode  in  triumph  and  commanded 
the  admiration  of  men  stout  of  heart  and  firm  of  purpose."  * 

*  Sweet,  Hist,  of  Canals,  Assem.  Doc,  vol.  i,  1863. 


64  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [388 

No  sooner  was  the  Erie  Canal  completed,  than  the  state 
entered  upon  the  policy  of  borrowing  money  for  the  purpose 
of  constructing  other  canals.  A  perfect  mania  for  increas- 
ing the  debt  of  the  state  for  canal  purposes  seemed  to 
sweep  over  the  legislature.  In  1825,  the  Seneca  and  Cayuga 
Canal  and  Oswego  Canal  were  authorized.  Counties  remote 
from  the  line  of  canals  were  strong  in  their  opposition  to 
these  projects,  and  to  meet  this  opposition  a  state  highway 
was  proposed  in  1826,  to  traverse  these  southern  counties, 
but  the  bill  was  lost  by  a  vote  of  50  to  48.  Of  these  50  who 
opposed  the  bill  all  but  10  were  from  counties  bordering 
upon  the  Erie  Canal. ^  In  1829,  two  more  canals  were  au- 
thorized, namely,  the  Crooked  Lake  and  Chemung  Canals. 
These  canals  were  made  a  charge  upon  the  canal  fund,  with 
no  provision  for  discharging  obligations  other  than  that  of 
the  tolls  and  the  premiums  derived  from  the  sale  of  state 
stock.  The  two  divisions  in  the  legislature,  those  repre- 
senting the  counties  along  the  Erie  Canal,  and  those  repre- 
senting the  counties  remote  from  the  canal,  were  fairly 
evenly  divided ;  both  desired  to  share  in  the  benefits  derived 
from  the  appropriation  of  state  funds,  and  little  heed  was 
given  to  the  recommendations  of  state  officers.  In  1830, 
the  canal  commissioners,  reporting  on  the  advisability  of 
constructing  the  Chenango  Canal,  stated :  "  That  it  would 
not  produce  an  amount  of  toll  .  .  .  equal  to  the  interest  on 
the  cost  and  the  expense  of  its  repairs  and  superintendence 
or  of  either  of  them."  ^  The  comptroller  and  governor 
pointed  out  that  the  state  should  not  incur  additional  ex- 
penses without  at  the  same  time  providing  the  means  of 
defraying  such  expenses,  but  in  the  face  of  all  these  objec- 
tions, the  applicants  for  this  canal  procured  the  passage  of 

1  Hammond,  History  of  Political  Parties,  vol.  ii,  p.  225. 
*Idid.,    p.  328. 


389]  INTERNAL  IMPROVEMENTS  65 

a  bill  by  a  vote  of  61  to  51,  which  ordered  the  canal  com- 
missioners to  proceed  with  the  construction  of  the  canal.  ^ 

The  supporters  of  internal  improvement  were  desirous 
of  making  the  financial  condition  of  the  state  appear  as  pros- 
perous as  possible,  and  both  parties  in  the  legislature  op- 
posed taxation  and  supported  every  subterfuge  devised  to 
meet  the  annual  expenses  without  resorting  to  taxation.  In 
spite  of  continued  warnings  from  the  comptroller,  the  capi- 
tal of  the  general  fund  was  used  in  paying  the  annual  ex- 
penses of  the  state.  A  bill  introduced  in  1832,  by  Mr. 
Bronson,  for  a  tax  of  one  cent  upon  the  real  estate  and  per- 
sonal property  of  the  state  for  the  purpose  of  preserving 
the  general  fund  received  only  five  votes  in  its  favor.  ^  Laws 
were  also  passed  authorizing  the  comptroller  to  borrow 
money  from  the  Common  School  Fund  ^  and  Bank  Fund,* 
in  order  to  defray  the  ordinary  annual  expenses,  and  in 
these  ways  an  attempt  was  made  to  give  the  appearance  of 
a  prosperous  financial  condition. 

By  1835,  some  improvement  of  the  canal  was  conceded 
to  be  a  necessity,  as  the  original  canal  no  longer  sufficed  to 
carry  the  increasing  volume  of  traffic.  A  project  for  a  ship 
canal  from  Lake  Ontario  to  the  Hudson  River  was  proposed 
at  a  public  meeting  in  Utica.  Some  advocated  converting 
the  Erie  Canal  into  a  railroad,  and  a  report  from  the  canal 
commissioners  was  presented  to  the  legislature  in  which  the 
comparative  advantages  of  canals  and  railroads  were  dis- 
cussed.^ In  1835,  bills  for  constructing  the  Black  River 
and  Genessee  Valley  Canals  were  defeated,  but  the  repre- 
sentation from  the  valley  of  the  Erie  Canal  secured  the 
passage  of  a  seemingly  inoffensive  bill  entitled,  "  An  Act 

*  Hammond,  op.  cit.,  p.  418.  '  Hammond,  op.  cit.,  p.  413. 

*  Laws  of  1832.  *  Laws  of  1833,  ch.  274. 

*  Governor's  Message,  p.  149. 


66         FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [390 

relating  to  the  Erie  Canal,"  which  provided  for  the  en- 
largement and  the  improvement  of  the  Erie  Canal,  and  the 
construction  of  a  double  set  of  lift  locks.  This  passed  with 
scarcely  any  debate.  The  cost  of  this  was  estimated  at  $12,- 
416,150,  and  the  time  required  was  estimated  at  12  years. 
The  enlargement  was  not  completed  until  1862,  27  years 
later,  and  the  actual  cost  was  over  $30,000,000.  Governor 
Marcy,  in  his  message  of  1836,  was  fully  aware  of  the 
danger  of  conducting  public  works  without  an  adequate 
financial  plan.  He  says,  "  The  improvident  plan  of  borrow- 
ing money,  without  providing  available  funds  for  paying 
the  interest,  has  already  been  carried  to  a  point  beyond 
which  it  cannot  be  pushed  without  serious  mischief.  On  a 
part  of  the  debt  the  interest  can  only  be  paid  by  new  loans, 
unless  you  resort  to  taxes  of  some  kind."  ^  The  same  year, 
however,  the  Black  River  and  Genessee  Valley  and  Oneida 
Lake  improvements  were  authorized,  while  $3,000,000  was 
given  to  aid  the  New  York  and  Erie  Railroad. 

The  year  1837  witnessed  a  change  in  politics.  The 
Democratic  Party  was  defeated  and  the  Whigs  came  into 
power.  This  newly-elected  Whig  party  accomplished  in 
the  main  the  purpose  for  which  it  was  elected,  namely,  the 
General  Banking  Law  of  1838;  but  it  had  no  sooner 
come  into  power  than  it  began  a  policy  of  extravagance, 
which  proved  as  detrimental  to  the  interests  of  the  state  as 
anything  the  Democratic  Party  had  done.  Owners  of  prop- 
erty, contractors,  brokers,  builders  and  expectants  of  all 
classes  created  a  coalition  strong  enough  to  control  the  ac- 
tivities of  the  legislature,  and  plunged  the  state  deeper  and 
deeper  into  debt.  With  extended  improvements  the  official 
power  and  patronage  of  the  commissioners  and  the  canal 
board  had  been  enlarged  to  an  immense  and  unlooked-for 

*  Governor's  Message,  p.  149. 


391  ]  INTERNAL  IMPROVEMENTS  67 

extent,  but  little  publicity  or  accountability  was  required. 
One-fourteenth  of  the  tolls  was  expended  in  salaries  and 
including  repairs  almost  one-half  the  entire  tolls  were  ab- 
sorbed/ 

During  the  panic  of  1837,  affairs  looked  very  black  in- 
deed :  money  could  not  be  readily  borrowed,  and  the  state 
stocks  brought  very  little  premium.  The  state's  credit  was  in 
jeopardy,  and  although  the  enlargement  was  regarded  as  a 
necessity,  and  much  had  already  been  done,  it  became  neces- 
sary to  curtail  expenses,  in  order  to  protect  the  credit  of 
the  state.  The  situation  was  critical.  On  the  one  hand  was 
the  urgent  need  for  better  canal  facilities  to  handle  the  in- 
creased volume  of  commerce,  and  on  the  other  hand,  was 
the  increasing  debt,  the  low  state  of  credit  and  the  belief 
that  taxation  should  not  be  resorted  to  for  the  purpose  of 
carrying  on  public  improvement.  The  legislature  chose  the 
plan  of  increasing  the  debt. 

The  famous  report  of  the  Committee  of  Ways  and  Means 
of  the  Assembly  in  1838,  reported  in  favor  of  borrowing 
$30,000,000  or  $40,000,000  for  the  more  speedy  enlarge- 
ment of  canals.  The  canal  commissioners  had  estimated 
that  the  annual  tolls  would  be  $3,000,000  within  a  few  years 
after  the  completion  of  the  enlarged  canals,  and  this  com- 
mittee, basing  their  conclusions  upon  this  estimate,  con- 
cluded that  a  sum  of  $30,000,000  might  be  borrowed,  ex- 
pended and  finally  reimbursed  within  twenty  years,  or  $40,- 
000,000  within  twenty-eight  years.  "  It  is  evident,"  says 
the  committee,  "  that  every  $500,000  of  revenue  will  serve 
as  a  basis  of  finance  to  sustain  $10000,000  of  debt.^ 

The  able  report  of  Comptroller  Flagg,  in  his  annual  re- 
port of  1838,  was  one  of  the  great  financial  documents  of 

*  Assem.  Doc.  tqo6.  vol.  v.  p.  157. 
-Ibid.,  242  of  183S,  p.  iS. 


68  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [392 

this  period.  He  pointed  out  that  if  it  was  sound  policy  to 
borrow  to  the  fullest  extent  of  the  means  possessed  for 
paying  the  annual  interest,  there  was  nothing  that  would 
warrant  the  contraction  of  a  debt  of  over  $12,000,000, 
since  the  net  revenues  of  the  state  would  be  sufficient  for 
paying  interest  on  only  that  amount.  Furthermore,  he  said, 
"  It  is  going  to  the  utmost  verge  of  prudence  to  create  a 
debt  sufficient  to  absorb  the  whole  annual  surplus  in  paying 
interest,  and  at  least  the  prospective  increase  from  tolls 
ought  to  be  left  untouched,  as  a  sinking  fund,  to  redeem 
the  principal  of  the  debt"  ^  Another  fallacy  equally  grave 
consisted  "  in  the  total  omission  to  take  into  account  the 
prospective,  but  certain  and  inevitable  expenses  of  keeping 
the  canals  in  repair  and  collecting  the  tolls.  These  expendi- 
tures for  a  period  of  20  years  would  amount  to  $20,000,- 
000."  ^ 

The  estimate  of  the  committee  was  also  based  upon  the 
supposition  that  the  canal  tolls  would  not  be  reduced.  The 
comptroller  argued  that  "  the  most  effective  means  of  secur- 
ing western  trade,  now  and  hereafter,  would  be  found  in 
keeping  the  finances  in  a  sound  condition,  and  thereby  being 
enabled,  without  embarrassment,  to  reduce  the  tolls  when 
the  interest  of  trade  required  it,  even  at  the  sacrifice  of  reve- 
nue." Such  a  reduction  was  possible  in  1833,  in  the  interest 
of  trade,  because  there  was  a  surplus  of  $3,000,000,  while, 
on  the  other  hand,  both  Ohio  and  Pennsylvania  had  been 
deterred  from  reducing  tolls  on  account  of  their  large  canal 
debts,  and  this  gave  the  New  York  canals  the  advantage  in 
securing  trade. 

Finally,  Comptroller  Flagg  argued  that  the  policy  of  ap- 
propriating canal  tolls  for  the  payment  of  interest  on  the 

*  A.  R.  Comptroller,  1838,  p.  21. 

*Ibid.  I 


393]  INTERNAL  IMPROVEMENTS  69 

loans  of  other  canals  was  unconstitutional,  since  it  declared 
that  rates  of  toll  shall  not  ''  be  reduced  or  diverted  at  any 
time  before  the  full  and  complete  payment  of  the  principal 
and  interest  of  the  money  borrowed  or  to  be  borrowed.'* 
In  spite  of  all  warnings  on  the  part  of  the  governor  and 
comptroller,  the  legislature,  in  1838,  authorized  the  loan 
of  $4,000,000  for  enlargements.^  The  financial  rule  adopted 
in  1839  was  as  stated,  "  to  avoid  the  necessity  of  resorting 
to  taxation  however  small,  the  obvious  and  sound  rule  of 
our  financial  policy  will  be  to  adjust  the  loans  of  each  year 
so  that  the  annual  interest  on  the  whole  debt  may  always 
fall  within  the  clear  income  of  the  state."  ^  The  plan  was 
to  borrow  as  long  as  the  surplus  tolls  afforded  means  of 
paying  the  interest,  and  to  make  no  provision  whatever  for 
paying  the  principal.  The  result  was  to  destroy  the  confi- 
dence of  money-lenders  to  such  a  degree  "  that  in  the  fall 
of  1 84 1  and  the  winter  of  1842  the  6  per  cent  stock  of  the 
state,  which  in  1833  t>ore  a  20  per  cent  premium,  were  not 
saleable  at  20  per  cent  discount,  and  large  lots  were  sold  at  a 
depreciation  of  22  cents  on  each  dollar  of  stock."  ^  "  When 
the  legislature  assembled  in  January,  1842,  the  credit  of 
the  state  was  at  its  lowest  point  of  depression ;  the  contrac- 
tors on  the  public  works  had  been  without  pay,  in  some 
cases,  many  months,  and  the  total  amount  due  them  and 
other  arrearages  exceeded  $1,000,000."  Besides  the  prin- 
cipal of  temporary  loans  from  banks,  due  in  March,  amount- 
ing to  $1,500,000  and  the  interest  on  this  amounting  to 
$246,000,  repairs  of  700  miles  of  canal  demanded  $235,711 ; 
the  general  fund  had  pressing  claims  against  it  for  several 
hundred  thousand  dollars,  and  in  addition  to  all  this,  $167,- 

*  Laws  of  1838,  ch.  269. 

'  Senate  Document,  no.  96,  p.  12,  1839. 

*  A.  R.  Comptroller  1843,  p.  21. 


-ro  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [394 

500  interest  was  now  due  upon  the  $3,000,000  borrowed  to 
aid  the  Erie  Railroad/ 

The  state  debt,  with  interest,  amounted  to  $25,999,074, 
of  which  approximately  $14,000,000  were  held  in  New  York 
State,  $11,000,000  were  held  by  foreigners,  and  $1,000,000 
in  other  states.  There  was  a  great  falling-off  in  amounts 
taken  by  foreigners.  In  1837,  more  than  two-thirds  of  the 
five  per  cent  stock  issued  was  taken  by  foreigners,  but  of 
the  six  per  cent  stock  issued  1840  and  1841,  only  $162,000 
out  of  three  million  was  taken  by  foreigners,  and  of  the 
four  million  issued  in  the  winter  of  1842,  at  7  per  cent,  and 
secured  by  the  pledge  of  a  tax  and  the  surplus  tolls,  only 
$63,500  were  taken  by  foreigners.^  The  comptroller  states 
the  case  very  tersely  in  his  report  for  1842,  where  he  says: 
"  It  is  not  now  a  question  whether  the  completion  of  the 
canal  will  be  beneficial  to  a  particular  section,  but  it  is  a 
question  of  solvency  or  insolvency;  it  has  become  purely  a 
question  of  finance.  The  impulse  for  internal  improvement 
and  local  interests  regardless  of  the  condition  of  the  finances 
has  pressed  the  state  to  the  very  brink  of  dishonor  and  bank- 
ruptcy." ^ 

The  result  was  the  "  stop  and  tax  law  of  1842,"  which 
provided  for  raising  a  tax  of  one  mill  on  each  dollar  of  real 
and  personal  estate.  The  whole  amount  raised  the  first  year 
and  one-half  of  the  proceeds  in  ensuing  years  were  to  go 
to  the  general  fund  and  the  other  half  to  the  canal  fund. 
All  expenditures  for  construction  were  suspended,  and  only 
necessary  expenditures  for  maintenance  and  repairs  were 
allowed.  A  loan  of  $1,000,000  was  advertised  for,  but 
only  $35,000  was  offered,  and  it  was  not  until  June  that 

^  A.  R.  Comptroller  1843,  p.  21. 
^  Ibid.,  p.  II. 
^  Ibid.,  p.  13. 


395]  INTERNAL  IMPROVEMENTS  71 

the  loan  was  taken.  Under  the  "  stop  and  tax  "  policy, 
state  stocks  to  the  amount  of  $5,089,337,  bearing  7 
per  cent  interest  for  seven  years,  were  authorized  to 
pay  the  state  debts,  and  a  tax  was  levied  to  redeem  these. 
Within  one  year  after  this  was  adopted,  credit  so  revived 
that  the  5  per  cent  stock  reached  par,  and  the  6  per  cent 
stock  was  above  par.  The  state  stocks  issued  for  preserv- 
ing the  credit  of  the  state  were  as  follows:  ^ 

1842  to  1848 Seven  per  cent $1,584,736 

1842  to  1849 Seven  per  cent 2,062,400 

1843  to  i85o Six  per  cent 620,000 

1844  to  1862 Five  per  cent 655,000 

1845  to  1862 Six  per  cent 500,000 


$5,422,136 


The  law  of  March  29,  1842,  which  suspended  the  public 
works,  provided  for  the  payments  of  the  debts  of  the  state 
in  the  following  manner :  ^ 

For  General  Fund  $884,595 

Interest  on  Canal  debts 241,474 

Repairs  of  Canals  and  for  Chemung  Locks 450,000 

Temporary  Loans    1,613,267 

Arrears  to  Contractors   1,000,000 

Land  Damages  and  Arrearages 500,000 

Losses  Sustained  Through  Failure  of  Banks...  400,000 


$5,089,337 


The  exper'ences  of  1841  and  1842  aroused  the  people  to 
take  some  action  tending  to  prevent  their  recurrence.  Ex- 
perience had  shown  that  it  was  unwise  to  leave  the  matter 
of  state  finance  to  the  unrestricted  power  of  the  legislature. 
Up  to  this  time  there  was  no  constitutional  debt  limit,  no 
opportunity  for  the  people  to  reject  or  to  sanction  the  crea- 

*  A.  R.  Comptroller  1843,  p.  22.  2  /^{^ 


72  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [396 

tion  of  a  debt  and  no  provision  for  sinking  funds.  The 
canal  fund  was  merely  a  trust  fund,  created  to  furnish  reve- 
nue for  carrying  on  the  work  of  constructing  the  canal,  and 
the  capital  or  income  of  this  fund  bore  no  relation  to  the 
amortization  of  the  principal  and  the  interest  on  the  annual 
loans.  Accordingly  a  convention  was  called  to  revise  the 
constitution. 

THE  CONSTITUTION  OF  1846 

The  constitution  provided  for  a  complete  reorganization 
of  the  judiciary,  several  changes  in  the  administrative  or- 
ganization in  the  state,  and  the  establishment  of  a  financial 
system. 

We  are  not  concerned  here  with  the  changes  in  the  judi- 
ciary except  to  state  that  the  method  of  compensating  the 
members  of  the  judiciary  was  changed  from  that  of  allow- 
ing them  fees  to  that  of  paying  them  a  fixed  salary. 

The  method  of  electing  the  more  important  state  officers 
was  changed.  Previous  to  this  time,  the  secretary  of  state, 
comptroller,  treasurer  and  attorney-general  had  been  nomi- 
nated and  elected  by  the  legislature.  The  new  constitu- 
tion provided  that  hereafter  they  should  be  elected  at  a 
general  election  and  should  hold  office  for  two  years.^  It 
also  provided  for  the  election  by  popular  vote  of  a  state 
engineer  and  surveyor,  three  canal  commissioners,  and 
three  inspectors  of  state  prisons.^ 

The  legislature  consisted  of  32  senators  and  128  assem- 
blymen. Their  salary  was  still  $3.00  per  day,  with  an  al- 
lowance of  $1.00  for  every  10  miles  travel,  but  with  the  pro- 
viso that  the  salary  should  not  exceed  $300.00  per  year  in 
the  aggregate. 

*  Art  5,  sec.  i. 

'  Art.  15,  sees.  2,  3  and  4. 


297]  INTERNAL  IMPROVEMENTS  73 

Two  important  provisions  governing  legislative  pro- 
cedure were  the  following:  No  private  or  local  bill  should 
embrace  more  than  one  subject,  and  that  should  be  expressed 
in  the  title/  No  money  should  be  paid  out  of  the  treasury 
except  in  pursuance  of  an  appropriation,  which  should  state 
the  sum  appropriated,  and  the  object  to  which  it  was  to  be 
applied.^ 

The  financial  provisions  were  the  following:  The  credit 
of  the  state  should  not  be  loaned  to  any  corporation.^  State 
loans  should  not  exceed  $1,000,000.*  The  state  might  ex- 
ceed this  limit  to  repel  invasion  or  suppress  insurrection.® 
Whenever  a  debt  was  contracted,  a  tax  should  be  imposed 
sufficient  to  pay  the  interest  and  principal  of  the  debt  within 
18  years,  but  this  law  should  not  take  effect  till  it  was  sub- 
mitted to  a  vote  of  the  people  at  a  general  election,  and  had 
received  a  majority  affirmative  vote.*  Article  7  provided 
for  the  following  sinking  funds.  Out  of  the  net  revenues 
of  the  state  canals,  there  should  be  set  aside  as  a  sinking 
fund  to  pay  the  canal  debt  as  it  existed  on  January  i,  1846, 
$1,300,000  from  January  i,  1846,  to  June  i,  1855,  and 
after  June  i,  1855,  $1,700,000,  but  in  this  amount  $300,000 
to  be  borrowed  was  included.^ 

After  complying  with  section  i,  and  beginning  in  1846, 
there  was  to  be  set  aside  $350,000,  and  after  the  entire 
canal  debt  was  provided  for  under  section  i,  then  $1,500,000 
was  annually  to  be  diverted  to  the  sinking  fund  for  the  gen- 
eral-fund debt,  including  debts  for  loans  of  the  state  credit 
to  railroads  and  the  contingent  debts  of  the  state. ^  After 
paying  all  expenses  of  the  canal,  and  providing  for  the 

*  Art.  3,  sec.  16.  '  Art.  7,  sec.  8. 

*  Ibid.,  sec.  9.  *  Ibid.,  sec.  10. 
^  Ibid.,  sec.  11.  *  Ibid.,  sec.  12. 
» Sec.  I.  •  Sec.  2. 


74         FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [398 

sinking  funds  in  sections  i  and  2,  there  were  to  be  paid 
annually  such  sums,  not  exceeding  $200,000,  to  the  general 
fund  for  current  expenses.  If,  after  eight  years,  this 
amount  was  insufficient,  it  might  be  raised  to  $350,- 
000,  and  after  the  canal  debt  and  general- fund  debts 
were  provided  for,  it  might  be  increased  to  $672,500.^ 
If  the  sinking  funds  proved  insufficient  to  enable  the  state 
to  pay  all  claims  as  they  became  due,  the  deficiency  might 
be  supplied  by  taxation;  but  every  advance  made  to  the 
canals  by  taxation  was  to  be  repaid  into  the  treasury  at 
quarterly  interest.^ 

The  year  1846  witnessed  not  only  the  adoption  of 
the  new  constitution  but  the  first  canal  investigation. 
This  showed  that  there  was  plentiful  evidence  of  ex- 
travagance and  that  more  or  less  corrupt  practices 
existed,  yet  no  specific  charges  were  formulated  against 
individuals,  and  the  committee  contented  itself  with 
pointing  out  ways  in  which  the  administration  might 
be  improved.  It  stated  that  laxity  on  the  part  of  canal 
commissioners  had  resulted  in  "  the  abstraction  of  large 
sums  from  the  treasury  for  work  entirely  unauthor- 
ized by  law."  "  Under  the  system  responsibility  has  en- 
tirely frittered  away."  Fraud  existed  in  paying  the  men 
employed  on  the  state  scows  through  false  duplication  of 
names.  Laxity  of  inspectors  tended  to  encourage  smug- 
gling, and  the  superintendent  of  repairs  invariably  pur- 
chased all  materials  at  private  sales  instead  of  at  public  auc- 
tion." 

In  order  to  understand  the  discussion  of  the  financial 
policy,  it  is  well  to  have  in  mind  the  administrative  organi- 

>  Sec.  3. 

» Art.  7,  sec.  5. 

*  Assembly  Document,  1847,  no.  100. 


399]  JNTERXAL  IMPRQVEMEXTS  75 

zation  of  the  canal  system.  The  canal  board  consisted  of 
the  commissioners  of  the  canal  fund,  who  were  the  elect've 
state  officials,  and  the  canal  commissioners,  who  were  elected 
by  the  people  to  this  office.  Each  canal  commissioner 
had  charge  of  one-third  of  the  canal  mileage  or  about 
240  miles,  and  had  general  superintendence  over  the  ad- 
ministration of  his  section.  Under  the  commiss'oners  wxre 
the  engineers  appointed  by  the  canal  board,  who  had  direct 
supervision  over  the  construction  work  and  were  assigned 
to  certain  divisions.  There  were  22  superintendents  of  re- 
pairs, also  appointed  by  the  canal  board,  whose  duty  it  was 
to  purchase  materials  to  keep  the  canal  in  repair.  They 
were  appointed  by  the  board  and  not  by  the  state  engineer, 
and  their  appointment  largely  depended  not  upon  their  fit- 
ness, but  upon  their  political  connection  with  the  canal 
board.  The  foremen  of  the  state  scows  commanded  gangs 
of  men  employed  in  repairing  canals.  There  were  200  lock 
tenders;  there  were  32  collectors  of  tolls,  with  18  inspectors 
under  the'r  direction,  who  inspected  boats,  to  see  if  the  cor- 
rect amount  of  toll  was  paid  to  the  state;  and  five  weigh- 
masters,  stationed  at  Albany,  West  Troy,  Utica,  Syracuse 
and  Rochester,  who  weighed  boats  for  those  that  paid  toll 
by  w^eight. 

The  work  on  the  canal,  which  had  stopped  in  1842,  was 
resumed  again  in  1847. 

THE  ERIE  CANAL  ENLARGEMENT 

The  canal  as  originally  constructed  was  40  feet  wn'dc  at 
the  top,  28  feet  wide  at  the  bottom,  and  4  feet  deep,  a 
capacity  which  provided  water  sufficient  for  boats  of  30 
tons,  and  enabled  them  to  carry  i,030  bushels  of  grain. 
During  the  years  1834  to  1862,  it  was  enlarged  to  the  di- 
mensions of  70  feet  wide  at  the  top,  56  feet  wide  at  the 


76  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [400 

bottom,  and  7  feet  deep,  which  would  enable  boats  of  240 
tons  and  8,000  bushels  capacity  to  navigate  them. 

The  funds  were  obtained  from  the  surplus  revenues  after 
making  appropriations  to  the  various  sinking  funds  as  pro- 
vided for  in  the  constitution.  The  legislature,  in  their  de- 
sire to  hasten  the  work,  adopted  the  plan  of  appropriating 
more  than  was  realized  from  tolls  by  way  of  anticipating 
the  next  year's  revenues,  until  the  sum  amounted  to  several 
hundred  thousand  dollars.  In  1848,  the  net  revenue  appli- 
cable to  this  purpose  was  $979,718,  all  of  which  had  been 
appropriated  by  the  legislature  of  1847. 

In  1849,  the  constitutional  surplus  amounted  to  $907,103, 
but  the  legislature  appropriated  $1,200,000.  Loans  were 
also  contracted  under  section  10,  of  article  7,  one  of  $30,000 
for  completing  the  state  arsenal  at  New  York,  and  another 
of  $50,000  to  provide  for  extra  repairs  and  improvements. 
The  fact  seems  to  have  been  as  stated  by  Governor  Fish, 
that  canal  improvements  "  were  progressing  as  rapidly  as 
the  limited  constitutional  appropriations  would  permit."  ^ 
The  construction  was  greatly  retarded  through  lack  of 
funds,  and  in  the  governor's  annual  message  of  185 1,  three 
plans  were  outlined  for  securing  the  necessary  funds.  The 
first  plan  was  to  sell  in  advance  to  capitalists  the  revenues 
of  the  canal,  which  were  devoted  by  the  constitution  to  the 
enlargement  of  the  Erie  Canal,  by  issuing  stock  certificates 
which  would  be  held  at  the  risk  of  the  purchaser  without 
recourse  to  the  state.  The  second  plan  was  to  pass  a  law 
under  section  12  of  article  7,  and  the  third  plan  was  to 
amend  the  constitution.  The  revenue-certificate  plan  passed 
the  Assembly,  but  was  vigorously  opposed  in  the  Senate, 
and  as  a  last  resort  twelve  of  the  opposing  senators  re- 
signed, leaving  the  body  without  a  constitutional  quorum. 

*  History  of  New  York  Canals,  1905,  p.  191. 


40I  ]  INTERNAL  IMPRO  VEMENTS  77 

In  this  emergency  the  governor  called  a  special  session,  at 
which  this  measure  became  a  law.  This  law  empowered 
the  comptroller  to  sell  canal-revenue  certificates  to  the 
amount  of  $3,000,000  a  year  for  three  years.  No  guar- 
antee of  the  state  was  behind  these  loans.  During  the  year 
the  comptroller  sold  $1,500,000  of  certificates  at  6  per  cent, 
realizing  a  small  premium. 

In  the  meantime  the  opponents  of  the  revenue-certificate 
plan  continued  to  urge  that  the  plan  was  unconstitutional. 
A  test  case  came  up  the  next  year  in  which  the  court  of 
appeals  decided  that  the  act  was  unconstitutional.  The 
act  having  been  declared  unconstitutional,  the  issue 
of  $1,500,000  under  its  terms  required  repayment  at  once. 
The  question  of  raising  the  money  for  this  purpose  now  oc- 
cupied the  serious  attention  of  the  legislature,  and  the  re- 
sult was  the  adoption  of  an  amendment  to  the  constitution, 
which  was  approved  by  the  people  at  a  special  election  called 
for  the  purpose.  This  amendment  provided  that  after  oper- 
ation and  maintenance  expenses  and  sections  i  and  2  of 
the  constitution  were  provided  for,  from  the  remainder  a 
sinking  fund  should  be  established,  sufficient  to  meet  the 
interest  and  principal  within  eighteen  years.  After  this, 
$200,000  was  to  go  to  the  expenses  of  the  government,  and 
the  remainder  was  to  be  applied  to  canal  enlargement  and 
completion.  This  remainder  was  not  to  be  anticipated  for 
more  than  a  year  in  advance.  Loans  could  be  made  not  ex- 
ceeding two  and  a  quarter  million  dollars  in  each  year  dur- 
ing the  next  four  years.  One  and  a  half -million  was  to  be 
borrowed  to  redeem  the  certificates  of  185 1.  Hereafter 
contracts  were  to  be  awarded  to  the  lowest  bidder.^ 

The  state  engineer  estimated  the  cost  of  completing  the 
work  at  $11,558,955,  and  notice  was  given  of  the  time 

*  Ihid.,  p.  211. 


78  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [402 

when  the  contracts  would  be  let.  The  amount  of  bids  was 
said  to  aggregate  about  $400,000,000,  and  the  number  of 
bidders  about  3,000.  *'  From  all  parts  of  the  state  and  from 
other  states,  from  all  walks  of  life  .  .  .  .  there  swarmed 
upon  the  Capitol  a  legion  of  applicants  all  anxious  and  im- 
portunate for  partxipation  in  the  anticipated  profits.  Some 
had  claims  real  or  imaginary  for  political  service;  others 
relied  upon  personal  friendship  for  success;  associations, 
combinations  and  partnerships  were  formed  .  .  .  for  the 
purpose  of  scouring,  in  the  name  of  some  of  them,  a  share 
of  the  contracts."^  Contracts  were  let  nominally  amount- 
ing to  $8,029,727. 

The  scandal  connected  with  this  letting  of  contracts  fur- 
nisned  the  occasion  for  the  second  legislative  investigation. 
The  majority  report  of  this  committee  "  admitted  that  the 
contracts  were  in  fact  proportioned  fairly  between  the  two 
political  parties,"  and  vigorously  defended  such  a  course  as 
being  the  only  practical  method  under  the  circumstances. 
They  advanced  the  interesting  argument  that  "  the  law 
sanctioned  by  all  experience  has  repudiated  the  idea  of 
letting  the  work  to  the  lowest  bidder."  ^ 

The  auditor's  report  of  1852  showed  that  in  the  six  years, 
1847  to  1852,  expenditures  had  exceeded  the  appropriations 
by  an  aggregate  of  $822,487.  Furthermore,  while  there  had 
been  an  apparent  reduction  of  the  canal  debt,  new  debts  had 
been  created,  payable  from  the  sinking  funds,  to  more  than 
balance  the  reduction,  and  that  after  six  years  the  obliga- 
tions of  the  state  for  canals  were  now  larger  than  when 
the  sinking  funds  were  established. 

The  canal  law  of  1853  authorized  the  comptroller  to  in- 
vest any  moneys  then  in  the  sinking  fund,  not  exceeding  the 

'  History  of  Canals,  1905,  p.  199. 
^  Ibid.,  p.  201. 


403]  INTERNAL  IMPROVEMENTS  79 

sum  of  $800,000,  in  a  tax  to  be  levied  beginning  October  ist, 
1853,  and  the  proceeds  of  this  tax  when  collected  were  to 
be  applied  first  to  reimburse  the  amount  so  invested.  The 
purpose  was  to  bridge  the  canal  department  over  a  difficulty 
by  anticipating  the  tax,  and  the  result  was  to  make  the  gen- 
eral fund  pay  6  per  cent  on  this  sum  for  the  benefit  of  the 
canal  fund.  A  curious  spectacle  was  thus  presented  of  in- 
vesting a  fund  sacredly  set  apart  for  one  purpose  in  a  tax 
which  had  not  been  levied  and  thereby  enabling  that  fund 
to  be  used  for  present  necessities. 

In  1853,  the  second  direct  tax  was  levied  for  canal  pur- 
poses. The  sum  of  $621,467  was  to  be  collected  for  paying 
canal  debts.  Of  this  $590,000  was  spent  for  protested  canal 
commissioners'  drafts,  drawn  after  the  commissioners  were 
informed  that  there  were  no  funds  to  pay  them.  These 
drafts  were  hawked  about  among  money-lenders  and  sold  at 
a  sacrifice  by  necessitous  holders. 

Another  investigation  brought  to  light  the  fact  that  ex- 
travagant expenditures  had  been  incurred  on  the  eastern 
division,  which  were  entirely  unauthorized  by  the  canal 
board  and  unconstitutional.  In  1853,  the  legislative  com- 
mittee reported  that  J.  C.  Mather,  commissioner  of  the 
eastern  division,  was  guilty  of  unauthorized  and  illegal 
expenditures  and  that  he  stood  "  impeached  for  high  crime 
and  misdemeanor."  The  trial  resulted  in  an  impeachment 
by  a  vote  of  80  to  35. 

The  contract  system  of  repairs  was  introduced  on  two 
sections  of  the  canal  in  1854,  and  in  1859  the  system  was 
extended  to  all  the  canals.  This  change  met  with  opposi- 
tion in  the  canal  board,  and  the  state  engineer,  in  1855, 
reported  that  "  experience  had  shown  that  it  was  impos- 
sible to  separate  the  management  of  the  canals  from  the 
deleterious  influence  of  politics  .  .  .  and  that  the  sale  of 


8o  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [404 

the  public  works  in  whole  or  in  part  was  the  only  effectual 
remedy  and  must  eventually  take  place."  ^ 

The  introduction  of  the  contract-repair  system  resulted 
in  a  great  saving  to  the  state  for  the  time  being,  yet  it  is 
questionable  whether  in  the  long  run  such  a  plan  was  eco- 
nomical. The  average  cost  of  superintendence  and  repairs 
for  the  five  years,  1855  to  1859,  was  $821,380.  Under  the 
contract  system  all  repairs  were  let  at  the  sum  of  $252,292, 
and  $20,000  for  superintendence.  The  governor  stated 
that  there  was  reason  to  believe  that  several  sections  had 
been  awarded  for  a  less  sum  than  they  should  have  been,  in 
order  to  enable  the  contractors  to  do  justice  to  the  state 
without  loss  to  themselves.  ^ 

By  1857,  the  nine  million  dollars  provided  for  by  the 
amendment  had  been  expended  and  five  millions  were  still 
needed  to  complete  the  work.  In  order  to  meet  all  the  con- 
stitutional appropriations  the  surplus  annual  revenues  of 
the  canals  should  have  amounted  to  $3,277,389.  They  had 
not  reached  this  figure  since  185 1,  and  had  steadily  declined 
until,  in  1859,  the  tolls  amounted  to  only  $1,812,281.  The 
only  recourse  was  to  resort  to  taxation,  and  beginning 
with  the  year  1856,  a  tax  was  imposed  each  year  down  to 
the  year  1882,  with  the  single  exception  of  the  year  1877. 
By  1859,  the  receipts  from  canal  tolls  had  reached  their 
lowest  point,  being  not  sufificient  to  pay  the  sums  required 
for  the  sinking  fund  under  section  i  of  the  constitution. 
The  funded  canal  debt  amounted  to  twenty- four  millions, 
and  the  new  canal  debt  amounted  to  twelve  millions ;  in  ad- 
dition there  were  outstanding  commissioners'  drafts  of  one 
million;  interest  charges  of  $955,000,  and  other  land  dam- 
ages of  one  million.    The  state  had  exceeded  the  debt  limi- 

*  History  of  New  York  Canals,  p.  224. 
'  Governor's  Message,  i860,  p.  155. 


405]  INTERNAL  IMPROVEMENTS  8 1 

tation  fixed  by  the  constitution  at  $1,000,000.  The  treas- 
ury was  in  a  deplorable  condition.  Many  advanced  the 
proposition  of  selling  the  canals  and  paying  off  the  state 
debt  in  view  of  the  diminishing  revenues  and  the  necessity 
for  further  taxation.  But  it  was  feared  that  if  this  were 
done  the  canals  would  inevitably  fall  into  the  hands  of  the 
railroads,  rates  would  be  raised  to  the  highest  limits  of  their 
power  of  enforcement,  and  the  regulative  benefit  of  the 
canals  would  be  lost  forever.^ 

An  interesting  petition  was  presented  to  the  legislature 
in  1858,  asking  for  a  convention  to  revise  the  constitution 
so  as  to  abolish  the  executive  and  legislative  departments 
of  the  government  and  vest  their  powers  in  the  president, 
vice-president  and  directors  of  the  New  York  Central  Rail- 
road. A  bill  calling  for  a  convention  was  passed,  and  the 
question  was  submitted  to  the  people  in  the  following  No- 
vember and  was  defeated  by  a  narrow  margin  of  only 
6,360  votes.^ 

An  act  was  submitted  to  the  people  in  1859  authorizing 
a  loan  of  $2,500,000  to  provide  for  the  payment  of  the 
floating  debt.  This  was  passed  by  a  vote  of  202,836  to 
77,466  against  it.  This  loan  was  applied  to  the  payment  of 
the  canal  commissioners'  drafts,  canal  commissioners'  cer- 
tificates, and  for  awards  of  canal  appraisers.  The  act  pro- 
hibited the  creation  of  any  similar  obligation  in  the  future. 

In  i860  the  canal  tolls  showed  a  marked  improvement, 
and  in  addition  to  this  the  expenses  for  repairs  had  been 
decreased  by  several  hundred  thousand  dollars.  The  cost 
of  completion  was  now  only  $700,000,  and  thus  the  long- 
deferred  enlargement  was  indeed  approaching  its  comple- 
tion.   The  tolls  increased  enormously,  during  the  next  few 

^  History  of  New  York  Canals,  p.  238. 
^  Ibid.,  p.  243. 


82  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [406 

years,  till  in  1863  they  reached  the  high- water  mark  of 
$5,028,431.  Finally,  in  1862,  the  state  officially  declared 
the  enlargement  completed,  and  although  much  was  left  to 
be  finished,  this  seemed  to  be  the  only  way  in  which  the  con- 
tinued expenditures  could  be  terminated. 

The  chief  difficulties  aside  from  extravagance  and  laxity 
of  administration  were  in  the  financial  plans  adopted.  To 
construct  canals  out  of  the  surplus  revenues  was  not  a  wise 
policy  on  account  of  the  inevitable  loss  and  derangement 
which  resulted  whenever  these  funds  were  insufficient.  The 
competition  of  the  railroads,  which  resulted  in  forcing  down 
the  rates  of  toll,  could  perhaps  not  have  been  foreseen,  but 
a  different  financial  plan  might  have  obviated  this  calamity. 

INTERNAL  IMPROVEMENTS. — PART  II 

State  Aid  to  Railroads  and  Canal  Companies 

The  attitude  of  the  government  toward  railroads  during 
the  early  period  of  their  development  was  that  of  encour- 
agement and  assistance.  State  stocks  were  issued  to  rail- 
road companies  with  the  expectation  that  the  railroads 
would  pay  the  annual  interest  and  the  principal  as  it  fell 
due.  As  security  to  the  state  a  mortgage  was  taken  on  the 
property  of  the  railroad  company.  This  plan  proved  to  be  a 
costly  one  to  the  state.  Many  of  the  railroads  failed  and 
the  stock  was  thrown  back  on  the  state  for  redemption,  and 
the  mortgages  proved  to  be  '*  mere  shadows  of  security." 
State  aid  was  solicited  under  the  plausible  pretext  of  de- 
veloping the  resources  of  the  state,  but  in  many  cases  it  re- 
sulted in  swelling  the  state  debt  and  increasing  the  burden 
of  taxation.  Of  $5,235,700  of  stock  issued  prior  to  1842, 
$3,665,700  was  redeemed  when  due  by  the  state. 

The  first  loan  of  state  stocks  was  made  to  the  Delaware 
&  Hudson  Canal  Co.  in  1827.    This  company  h^d  already 


407]  INTERNAL  IMPROVEMENTS  83 

spent  about  a  million  dollars  on  construction,  and  all  this 
work  was  mortgaged  to  the  state  to  indemnify  it  against 
loss.  The  next  year  $10,000  was  loaned  to  the  Neversink 
Navigation  Co.,  the  state  taking  a  mortgage  on  the  interest 
of  the  company  in  the  Neversink  River.  Of  this  sum  $2,500 
was  spent  in  purchasing  land  and  erecting  buildings,  $2,000 
in  purchasing  a  store  of  goods,  and  five  or  six  thousand  dol- 
lars in  the  payment  of  old  debts.  In  1833,  the  attorney- 
general  declared,  '*that  the  mortgage  upon  all  the  privileges 
of  the  corporation  was  worth  nothing  and  the  foreclosure 
of  it  would  be  a  useless  expenditure  of  money."  The  total 
loss  to  the  state  was  about  $15,000. 

In  1836,  three  millions  of  dollars  were  authorized  to  be 
loaned  to  the  New  York  and  Erie  Railroad,  upon  certain 
conditions,  and  the  last  million  was  not  to  be  paid  until  the 
road  was  completed.  Two  years  later  the  legislature  pro- 
vided that  one  dollar  of  state  stock  should  be  issued  for 
each  dollar  expended  by  the  company.  This  was  increased 
to  two  dollars  of  state  stock  in  1840,  and  this  provision  was 
made  applicable  to  every  dollar  expended  by  the  company 
since  the  commencement  of  the  work.  Under  this  law 
$400,000  were  issued  in  1840,  over  a  million  in  1841,  and 
from  November,  1841,  to  January,  1842,  the  company  re- 
ceived eight  hundred  thousand  dollars.  In  January,  1842, 
the  state  stocks  were  sold  as  follows:  Six  per  cent  of  1861 
at  81 ;  five  and  a  half  per  cent  of  i860  at  75 ;  and  five  and  a 
half  per  cent  of  1858  at  yy.  On  March  12,  1842,  the  Erie 
Railroad  announced  its  inability  to  pay  the  interest  of  the 
ist  of  April  on  the  three  million  of  stock  loaned  to  it.  The 
only  recourse  open  to  the  state  was  to  advertise  the  road  six 
months  and  sell  it.  In  the  meantime,  the  company  could 
assign  all  its  personal  property  and  rolling  stock,  leaving 
only  the  mere  track  and  the  land  connected  with  it.  All 
the  laws  in  relation  to  these  loans  left  the  treasury  in  the 


84         FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [408 

lurch  and  screened  the  managers  of  the  corporation  from 
all  liability,  so  that  the  "  mortgages  on  the  railroad  were 
mere  shadows  of  security."  ^ 

The  unsuccessful  attempts  to  sell  the  railroads  at  public 
auction  were  illustrated  in  the  cases  of  the  Catskill  &  Cana- 
joharie  and  the  Ithaca  and  Owego  R.  R.  The  former  had 
received  $200,000,  and  the  latter  $315,000  of  state  stocks. 
In  1 84 1,  both  companies  failed,  and  after  being  duly  adver- 
tised, they  were  offered  for  sale  to  the  highest  bidder; 
no  bids  were  received.  Messrs.  Yates  and  Mclntyre,  who 
were  present,  agreed  to  make  a  bid  if  the  sale  was  postponed 
long  enough  to  afford  them  time  to  examine  the  road.  At 
the  joint  sale  on  May  20th,  the  Ithaca  &  Owego  R.  R.  was 
bid  off  by  Archibald  Mclntyre  for  the  sum  of  $4,500,  and 
the  Catskill  &  Canajoharie  to  Amos  Cornwell  for  $11,600. 

The  total  amount  issued  between  1827  and  1842  to  canals 
and  railroad  companies  was  as  follows : 


2 


Delaware  &  Hudson  Canal  Co $800,000 

*  New  York  &  Erie  R.  R 3,000,000 

*  Canajoharie  &  Catskill  R.  R : 200,000 

*  Ithaca  &  Owego  R.  R 315700 

Aubui  n  &  Syracuse 200,000 

Auburn  &   Rochester    200,000 

*  Hudson  &  Berkshire  R.  R 150,000 

Tioga  Coal  Iron  Mining  &  Mfg.  Co 70,000 

Tonawanda   100,000 

Long  Island   R.   R 100,000 

Schenectady  &  Troy  R.  R 100,000 


$5,235,700 


Of  this  amount  the  sums  loaned  to  the  companies  marked 
with  an  asterisk  above  became  a  part  of  the  state  debt,  in 

^  A.  R.  Comptroller,  1843,  p.  ?3- 
2  Ibid.,  1867,  p.  100. 


409]  INTERNAL  IMPROVEMENTS  85 

consequence  of  the  failure  of  these  companies,  and  the  stock, 
amounting  to  $3,665,700,  was  redeemed  when  due  from  the 
general  fund  debt  sinking  fund.  The  other  companies 
continued  to  pay  the  interest  on  the  stock  and  finally  re- 
deemed the  stock  as  it  fell  due. 

Canals  and  Railroads 

While  liberal  assistance  was  offered  in  the  manner  of 
granting  state  funds,  the  state  made  a  few  feeble  attempts  to 
regulate  the  developing  railroads  in  the  interest  of  the  canals. 
Gradually,  however,  the  railroads  became  powerful  enough 
to  throw  off  all  such  restrictions  and  finally  came  to  control 
both  the  legislature  and  the  courts.  The  canal  and  railroad 
legislation  was  intimately  related.  At  first  the  railroads 
were  regulated  in  the  interest  of  the  canals,  but  after  the 
railroads  became  all  powerful,  an  attempt  was  made  to 
regulate  them  by  means  of  canal  competition.  This  at- 
tempt, however,  was  unsuccessful. 

The  original  charters  gave  the  railroads  a  right  to  carry 
passengers  only.  In  1836,  the  New  York  Central  Railroad 
was  allowed  to  carry  freight  only  on  the  condition  that  it 
paid  the  regular  canal  tolls,  and  in  1844  this  privilege  was 
extended  to  all  railroads.  Later  this  demand  was  enforced 
only  during  the  season  of  canal  navigation,  but  even  then  it 
was  not  strictly  enforced.  The  canal  tolls  paid  by  six  rail- 
roads in  1844  and  1845  amounted  to  $10,458,  or  only  about 
as  much  as  one  day's  canal  traffic  would  amount  to.  This 
condition  of  affairs  led  to  an  investigation  which  resulted 
in  the  imposition  of  a  fine  for  non-compliance  with  the  law. 
In  1849,  it  became  apparent  that  the  railroads  were  secur- 
ing most  of  the  passenger  traffic,  but  in  spite  of  t'lis  the 
canal  commissioners  reported  favorably  a  bill  to  remove 
tolls  on  property  carried  on  railroads  and  recommended  the 
repeal  of  the  law  requiring  tolls  on  freight  carried  during 


86  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [410 

January,  February  and  March,  and  a  further  modification 
of  tolls  on  live  stock,  fresh  meat,  fish,  poultry  and  dairy 
products.  Year  after  year  the  list  of  articles  that  might  be 
transported  free  of  tolls  was  increased,  and  in  185 1  all  canal 
tolls  on  railroads  were  abolished.  The  legislature  which 
passed  the  law  abolishing  tolls  also  passed  a  law  providing 
for  the  early  completion  of  the  canal  improvements,  in 
order  that  the  canals  in  their  improved  form  might  success^ 
fully  compete  with  railroads  which  were  taking  the  business 
away  from  them.  Governor  Hunt,  in  185 1,  entertained 
serious  apprehensions  that  the  trade  of  the  Erie  Canal 
would  be  impaired  by  the  competition  of  the  railroads.^ 
But  two  years  later,  Governor  Seymour  expressed  what 
was  apparently  the  theory  back  of  the  railroad  legislation 
of  the  period.  He  said :  "  The  people  will  always  wish  to 
reduce  rates,  whereas  the  railroads  will  wish  to  maintain 
high  rates,  and  hence  the  canals  will  be  of  great  value  in 
controlling  the  rates  of  transportation."  ^  The  effect  of  too 
low  railroad  rates  on  the  canals  was  not  foreseen. 

The  decreasing  tolls  began  to  cause  alarm  in  1854,  and 
the  committee  of  ways  and  means  reported  a  bill  to  reim- 
pose  tolls  on  railroads.  It  was  seen  now,  apparently  for 
the  first  time,  that  the  canals  could  not  compete  with  the 
railroads,  even  when  enlarged  and  improved.  This  bill 
divided  the  railroads  into  three  groups :  the  first  group  was 
to  pay  regular  canal  tolls  on  freight ;  the  second  group  was 
to  pay  two-thirds  canal  rates;  and  the  third  group  was  to 
pay  one-half  canal  rates.  The  power  of  the  railroads  was 
exhibited  in  a  striking  manner  on  this  occasion.  Thou- 
sands of  printed  forms  were  distributed.  From  the  cities 
and  towns  along  the  railroad  came  remonstrances  of  offi- 

*  Governors  Message,  185 1,  p.  541. 
2  Ihid.,  1853,  p.  674. 


41 1  ]  INTERNAL  IMPROVEMENTS  87 

cials,  business  men,  shippers  and  bankers.  The  business 
men  of  New  York  City  added  their  signatures  upon  the 
ground  that  trade  would  be  withdrawn  from  that  city.  The 
result  was  that  the  bill  was  not  reported  out  of  committee. 

The  commissioners  admitted  that  since  1850  the  tolls  had 
been  frequently  reduced  to  meet  the  competition  of  the  rail- 
roads. This  was  shown  in  the  decreased  tolls  which  fell 
from  $3,702,000  in  185 1,  to  $1,812,280  in  1859.  If  the 
tolls  of  1846  had  been  retained  upon  the  tonnage  of  1856, 
the  revenues  would  have  been  nearly  five  millions. 

Year  after  year  the  governors  continued  to  urge  the  re- 
imposition  of  railroad  tolls  and  the  attorney-general  gave 
an  opinion  upon  the  constitutionality  of  the  act  of  185 1, 
which  abolished  tolls  on  railroads,  in  which  he  declared  the 
act  to  be  a  "  diversion  of  canal  revenues  and  as  such  was 
unconstitutional  and  void."  No  legislative  action  resulted 
however.  The  result  of  this  act  was  to  give  the  railroads 
redoubled  power,  as  competitors  for  the  traffic  of  the  canal, 
and  some  have  contended  that  no  single  act  has  been  fraught 
with  greater  and  more  far-reaching  consequences  to  the 
canals  than  this  one.  The  state  engineer  even  went  so- 
far  as  to  say  that  every  dollar  of  the  subsequent  canal  debt 
and  of  the  millions  which  have  since  been  raised  by  taxation 
for  its  payment  were  the  result  of  this  act.^ 

The  competition  did  assume  a  more  serious  character 
than  was  imagined,  and  this  was  the  real  cause  in  forcing 
the  people  to  abandon  tolls  on  the  canals  themselves.  Dur- 
ing the  later  seventies  the  railroad  rates  were  ruinously  low 
during  the  open  canal  season,  and  during  the  closed  season 
the  roads  recouped  themselves;  but  aside  from  this  advan- 
tage the  tremendous  development  that  had  taken  place  in 
railroad  construction  had  lessened  the  cost  of  transporta- 

*  History  of  New  York  Canals,  1905,  P-  196. 


88  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [412 

tion  from  three  and  one-half  cents  per  ton  mile  to  one-half 
cent  per  ton  mile.  Between  1835  and  1882  the  railroad 
mileage  had  increased  from  100  to  6,600  miles;  align- 
ments and  grades  had  been  straightened  and  reduced;  the 
Erie  had  double-tracked,  and  the  Central  had  quadruple- 
tracked  their  lines;  steel  rails  and  bridges  had  replaced 
wood;  and  the  locomotives  had  quadrupled  their  power. 
With  such  prodigious  development  as  this  taking  place,  the 
canals  were  forced  into  the  background  and  competition  be- 
came impossible.^ 

Railroads  and  the  Legislature 
The  increased  number  of  accidents  on  the  railroads  caused 
a  state  commission  to  be  appointed  in  1855,  but  this  existed 
for  only  two  years.  Officials  acknowledged  that  the  tariffs 
of  the  great  lines  were  regulated  by  conventions,  pools,  or 
consolidations  as  early  as  1853,  ^^^  that  since  then  they 
had  controlled  legislation  whenever  they  pleased  to  do  so. 
The  rising  power  of  the  railroad  was  seen  not  only  in  their 
ability  to  stifle  undesired  legislation,  but  in  their  activity  in 
securing  the  passage  of  measures  which  advanced  their  inter- 
ests more  directly.  For  a  number  of  years  bills  were  intro- 
duced to  grant  money  from  the  treasury  to  aid  the  Albany 
&  Susquehanna  Railroad,  and  for  a  time  these  bills  were 
vetoed  by  the  governor,  and  were  not  passed  over  his  veto. 
In  1863  and  1864,  however,  this  bill  became  a  law,  and  pro- 
vided for  the  imposition  of  a  tax  of  three-sixteenths  of  a 
mill  for  the  purpose  of  raising  $500,000  to  aid  this  railroad. 
The  aggregate  appropriations  proposed  to  be  made  from  the 
state  treasury  to  railroad  corporations  introduced  in  the 
legislature  in  the  year  1869  amounted  to  $4,316,000.  In 
the  main,  however,  the  governor's  veto  counteracted  this 
disastrous  policy,  and  the  bills  were  not  passed  over  his 

*  History  of  New  York  Canals,  p.  318. 


413]  INTERNAL  IMPROVEMENTS  89 

veto.  It  was  the  villages,  towns  and  cities  which  suffered 
most  during  these  years  of  railroad  speculation.  The  in- 
habitants of  towns  were  induced  to  subscribe  to  the  capital 
stock  of  the  railroad  companies,  and  to  issue  corporate 
bonds  to  pay  for  them.  In  many  cases  the  subscriptions 
were  a  total  loss,  and  the  debts  were  paid  by  taxation.  The 
constitutional  amendment  of  1874  contained  important 
provisions  against  the  plan  of  passing  private  or  local  bills, 
and  regulating  the  grant  of  franchises  to  railroad  corpor- 
ations. 

One  of  the  saddest  chapters  in  the  history  of  the  New 
York  legislature  was  that  exhibited  at  the  time  of  the 
memorable  Erie  Railroad  contest  between  the  Vanderbilts 
and  Daniel  Drew,  Jay  Gould  and  James  Fisk.  Vanderbilt, 
in  attempting  to  corner  the  stock  of  the  Erie,  found  himself 
buying  worthless  certificates  which  his  opponents  were  is- 
suing in  unlmitied  quantities.  Perceiving  his  mistake,  he 
turned  his  attention  to  litigation,  in  which  he  called  upon 
Drew  to  refund  58,000  shares  of  stock  illegally  issued,  and 
charged  Jay  Gould  with  pocketing  several  millions  of 
dollars.  Drew  and  his  party  fled  to  New  Jersey  and 
commenced  an  action  against  Vanderbilt  and  Judge 
Barnard,  charging  them  with  having  entered  into  a  combi- 
nation to  speculate  in  the  stock  of  the  Erie.  The  affair 
could  not  be  settled  in  the  courts,  owing  to  the  fact  that 
one  judge  on  an  ex-part e  statement  of  one  side  would  issue 
an  order  which  another  judge  on  an  ex-parte  statement  of 
the  other  side  would  immediately  set  aside.  A  bill  calling 
for  a  legislative  investigation  was  introduced  in  1868,  but 
this  was  followed  by  a  bill  authorizing  the  Erie  Railroad  to 
issue  $10,000,000  of  stock.  Fabulous  sums  were  promised, 
or  said  to  be  in  store  for  the  friends  of  the  Erie  bill.  It 
was  stated  that  the  Erie  people  were  willing  to  spend  $2,- 
000,000,  if  necessary,  to  insure  the  success  of  the  pending 


go  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [414 

measure.  The  Erie  people  promised  at  the  outset  $1/000  a 
vote — $500  down  and  $500  when  the  bill  should  become  a 
law.  The  members  of  the  legislature  who  were  receiving 
$300  per  session,  saw  in  this  a  chance  to  double  or  quad- 
ruple their  year's  salary.  "  Some  suggested  one  thousand 
dollars  a  head,  but  they  were  smiled  at  for  their  lack  of 
boldness,  and  for  their  unsophisticated  innocence."  ^ 

In  the  midst  of  all  this  uproar  at  Albany,  Vanderbilt  and 
Drew  came  to  a  sort  of  compromise,  and  the  lobbyists  sud- 
denly withdrew  from  the  capitol.  "  The  magnificent  pros- 
pect of  wealth  vanished  into  air,  and  the  next  morning  the 
assembly  railroad  committee  reported  unanimously  against 
the  bill,  and  the  vote  was  agreed  to  by  a  vote  of  83  to  13 — 
thirty-two  disgruntled  members  being  absent  at  roll  call."  ' 

The  legislative  committee  of  investigation,  which  fol- 
lowed, after  examining  the  books  of  the  Erie  and  New  York 
Central,  found  that  "  no  money  had  been  appropriated, 
drawn  or  used  for  influencing  the  legislature." 

Some  of  the  methods  employed  by  the  railroads  were 
well  brought  out  in  a  legislative  investigation  in  1878. 
First,  the  railroads  had  a  few  representatives,  usually  paid 
attorneys,  whom  they  openly  sent  to  the  legislature  in  their 
interests.  Secondly,  Jay  Gould  testified  in  1872  that  the  Erie 
Railroad  "  had  four  states  to  look  after,  and  it  suited  its 
politics  to  circumstances."  In  1868,  more  than  one  million 
.dollars  was  spent  by  the  Erie  Railroad  for  "  extra  and  legal 
services,"  to  control  elections  and  to  influence  legislation. 
He  also  testified  that  large  payments  w^ere  made  during  the 
three  years  prior  to  1872  to  Barber,  Tweed  and  others  to 
influence  legislation.  Thirdly,  another  class  of  representa- 
tives were  influenced  by  means  of  free  passes  and  other 

*  M.  P.  Breen,  Thirty  Years  of  New  York  Politics,  p.  139. 

•  Ibid.,  p.  141. 


415]  INTERNAL  IMPROVEMENTS  91 

courtesies;  and  fourthly,  the  other  representatives  were 
forced  to  vote  for  railroad  measures  in  order  to  get  their 
own  measures  through,  and  merchants  and  manufacturers 
were  subjected  to  the  domination  through  the  granting  of 
special  freight  rates/ 

The  marvelous  development  of  the  railroad  system  pre- 
sented a  new  problem  before  which  the  older  theories  of 
government  remained  ineffectively  helpless.  No  machinery 
existed  to  meet  the  exigencies  of  the  new  conditions.  The 
government  looked  to  dealings  with  individuals,  and  with 
these  as  isolated  competing  units,  and  not  as  organized 
units.  So  rapidly  did  the  corporate  industrial  system  de- 
velop and  so  engrossed  were  the  people  in  acquiring  wealth 
that  these  huge  combinations  of  wealth  and  power  developed 
unnoticed,  or  at  least  unmolested.  The  legislature  became 
a  species  of  irregular  board  of  railroad  direction.  Ques- 
tions of  the  purest  detail  affecting  the  operation  of  railroads 
were  brought  before  the  legislature  to  be  decided  upon  by 
statute,  and  the  railroads  were  forced  into  the  lobby  in  self- 
defence. 

Later  Improvements  of  the  Erie  Canal 
During  the  Civil  War,  the  canal  traffic  was  augmented 
in  consequence  of  the  closing  of  southern  ports  and  the 
stopping  of  trade  on  the  Mississippi.  This  prosperous  era 
for  the  canal  demanded  increased  facilities  for  transporta- 
tion. Several  plans  were  proposed  for  either  widening  the 
old  canal  or  constructing  new  works.  Among  these  were 
the  plans  to  enlarge  the  Champlain  Canal,  so  as  to  allow 
gunboats  to  pass  through  Lake  Champlain  from  the  Hudson 
to  the  St.  Lawrence,  and  to  construct  a  canal  around 
Niagara  Falls.  This  latter  plan  was  especially  advocated 
by  the  western  states  and  by  Massachusetts,  and  received 

*  N.  Y.  Board  of  Trade  and  Transportation,  June  12,  1878. 


92  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [416 

some  attention  in  Congress.  It  was  however  vigorously 
denounced  by  the  canal  board  on  the  ground  that  it  would 
be  more  or  less  destructive  to  the  prosperity  of  the  canal 
and  the  commerce  of  New  York  City. 

The  question  of  acceleration  of  speed  and  consequently 
cheaper  transportation  occupied  a  large  share  of  the  atten- 
tion of  the  legislature.  Various  methods  of  steam  propul- 
sion were  authorized,  beginning  with  the  year  1870,  when 
the  Belgian  system  of  towing  boats  by  means  of  a  cable  laid 
upon  the  bottom  of  the  canal  was  introduced.  Grants  of 
money  were  made  to  several  canal  steamboat  companies  on 
certain  conditions.  New  appliances  were  installed  to  accel- 
erate the  raising  and  lowering  of  locks  and  new  feeders  and 
reservoirs  had  to  be  constructed  to  furnish  the  needed  supply 
of  water  for  the  increasing  traffic.  In  1874,  the  Baxter 
Steam  Canal  Boat  Company  operated  seven  boats.  The 
Baxter  boat  was  90  feet  long,  with  a  capacity  of  207  tons, 
and  the  cost  of  transporting  a  bushel  of  wheat  from  Buffalo 
to  New  York  by  this  method  was  five  and  seven  six-hun- 
dredths  cents.  The  cost  by  horse-drawn  boats  was  five  and 
sixty-nine  one-hundredths  cents.  The  maximum  tonnage 
of  the  canals  was  reached  in  1872,  when  the  total  tonnage 
amounted  to  6,673,370  tons,  and  the  value  of  the  tonnage 
amounted  to  $220,913,321. 

The  increased  volume  of  business  stimulated  legislative 
appropriations  and  corruption  continued.  Money  was  plen- 
tiful and  liberally  expended  and  "  contractors  and  public 
officials  embraced  the  opportunity  to  overstep  the  bounds  of 
integrity."  In  1867,  a  committee  was  appointed  to  inves- 
tigate the  management  of  canals.  This  committee  found 
that  the  loss  of  money  to  the  state  by  frauds  practiced 
within  the  preceding  ten  years  amounted  to  several  mil- 
lion dollars.  Various  contractors  had  held  an  organized 
meeting  at  Stanwix  Hall,  Albany,  at  which  the  right  to 


417]  INTERNAL  IMPROVEMENTS  93 

make  exclusive  bids  was  put  up  and  auctioned  off  among 
themselves.  The  amount  thus  realized  was  divided  among 
themselves,  and  the  successful  bidder  recouped  himself  by 
adding  the  amount  to  his  bid.  The  other  proposals,  being 
"  dummy  bids,"  were  rejected  for  technical  reasons.  The 
contracting  board  was  found  to  be  guilty  of  corrupt  collu- 
sion with  the  contractors.  "  Numerous  relief  bills  were 
(had  been)  skillfully  engineered  through  the  legislature, 
through  which  the  canal  board  was  authorized  to  render  ex- 
cessive awards."  ^ 

The  constitutional  convention  of  1867  proposed  to  abolish 
the  canal  board,  the  contracting  board,  the  offices  of  canal 
commissioners,  canal  appraisers,  and  to  invest  all  canal  ad- 
ministration, except  financial,  in  a  superintendent  of  public 
works.  It  also  proposed  to  create  a  court  of  claims.  Al- 
though this  constitution  was  not  ratified,  most  of  these  sug- 
gestions later  found  their  way  into  the  constitution. 

Another  investigation  was  made  in  1872,  and  a  constitu- 
tional committee,  composed  of  32  members,  was  appointed 
to  propose  constitutional  amendments.  The  three  amend- 
ments proposed  and  adopted  by  the  people  at  the  November 
election  of  1874  were  the  following:  first,  to  forbid  extra 
compensation  to  contractors;  second,  to  limit  the  expendi- 
tures for  collections,  superintendence,  ordinary  and  extra- 
ordinary repairs,  to  the  amount  of  the  gross  receipts  of  the 
previous  year;  and  third,  to  remove  the  prohibition  to  sell 
the  canals,  with  the  exception  of  the  Erie,  Oswego,  Cham- 
plain,  Cayuga  and  Seneca  Canals.  Finally,  in  1876,  the 
office  of  Canal  Commissioner  was  abolished  and  that  of 
Superintendent  of  Public  Works  was  created. 

The  objections  to  the  contract  system  reached  their  height 
about  1870.     This  system  was  largely  blamed  for  the  ac- 

*  History  of  New  York  Canals,  1905,  p.  270. 


94  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [418 

cumulated  deposits  of  mud  and  silt  in  the  bottom  of  the 
canals,  and  the  frequent  breaks  and  resulting  interruptions 
in  navigation.  In  this  year  the  contracting  board  and  the 
system  of  canal  repairs  by  contract  was  abolished.  The  new 
system  seems  to  have  been  a  marked  improvement  in  spite 
of  the  increased  cost  of  maintenance  and  repairs  which  re- 
sulted for  the  first  few  years  following  the  change. 

Very  little  new  or  extraordinary  construction  was  under- 
taken during  the  sixties.  The  plan  seems  to  have  been  to 
operate  the  canals  as  economically  as  possible  and  apply  the 
revenue  to  the  payment  of  the  debt.  In  1868,  the  last  pay- 
ment was  made  to  the  sinking  fund  under  Article  7,  Sec- 
tion I  of  the  Constitution.  From  1846  to  1868,  the  tolls 
contributed  to  this  fund  $32,597,379;  the  proceeds  frorq 
taxes  amounted  to  $410,910;  loans  to  supply  deficiencies 
amounted  to  $9,267,025 ;  and  there  was  received  from  mis- 
cellaneous sources  $7,415,071,  making  a  total  contribution 
of  $49,692,385.^  The  extinguishment  of  this  debt  liberated 
$1,700,000  of  the  canal  revenues  for  other  purposes. 

There  was  contributed  to  the  sinking  fund  under  article 
7,  section  3,  from  1854  to  1882,  in  tolls,  $11,154,510;  from 
taxes  $9,659,274;  from  loans  to  supply  deficiencies,  $11,- 
886,000,  and  from  miscellaneous  sources,  $1,361,371,  mak- 
ing a  total  contribution  of  $34,061,155.^  The  sinking  fund, 
under  article  7,  section  12,  was  largely  supplied  from  taxes, 
and  from  temporary  loans.  From  i860  to  1877,  taxes 
yielded  $4,752,984;  temporary  loans,  $1,875,884,  and  mis- 
cellaneous sources,  $276,889,  making  a  total  contribution 
of  $6,905,758.^  The  total  amount  of  taxes  collected  on  ac- 
count of  the  canal  fund  from  1846  to  1882  was  $38,699,- 
202.     . 

»  Annual  Report,  Canal  Auditor,  1882,  p.  49. 

« Ibid.,  p.  52.  •  Ibid.,  p.  54- 


419]  INTERNAL  IMPROVEMENTS  95 

The  history  of  the  canal  during  the  seventies  is  mainly 
an  account  of  successive  legislative  investigations.  Hardly 
a  year  passed  without  a  special  report  upon  some  phase  of 
canal  administration.  We  have  already  alluded  to  the  com- 
mission of  1 87 1  and  1872,  appointed  to  investigate  the  pos- 
sibilities of  using  steam  power  and  to  the  constitutional 
commission  of  1873.  ^^  1^75*  ^  committee  was  appointed 
to  cover  the  whole  period  from  1868  to  1875.  This  com- 
mittee reported  that  "  the  interests  of  the  public  had  been 
systematically  disregarded.  The  responsibility  of  the  state 
agents  had  been  so  divided  and  distributed  as  to  leave  the 
state  comparatively  remedyless,  and  at  the  mercy  of  preda- 
tory classes."  ^ 

The  methods  of  letting  contracts  discouraged  bidders  of 
small  means,  and  confined  the  work  almost  exclusively  to 
the  large  capitalists.  Specifications  for  contract  work  were 
not  enforced,  greatly  to  the  loss  of  the  state.  If  the  canal 
board  failed  to  cancel  a  contract  which  proved  disadvan- 
tageous to  the  contractor,  the  latter  often  appealed  to  the 
legislature,  which  usually  made  awards  to  cover  his  losses. 
Things  were  going  from  bad  to  worse,  so  that  when  Samuel 
Tilden,  fresh  from  his  victory  over  the  Tweed  Ring  in  New 
York  City,  was  elected  governor,  affairs  were  in  a  condition 
to  make  reform  possible.  The  public  conscience  was 
aroused,  the  power  of  the  "  Ring  "  had  been  broken,  and 
reformation  followed.  The  plan  adopted  may  be  described 
as  that  of  retrenchment  and  of  parsimony.  Tilden's  plan 
was  to  perfect  the  existing  system.  He  started  the  move- 
ment which,  a  few  years  later,  resulted  in  the  abolition  of 
all  tolls  on  the  canals.  He  pointed  out  that  the  price  of 
grain  was  fixed  in  foreign  markets,  that  cheaper  tolls  bene- 
fited the  western  producer,  and  that  the  state  should  not 

*  History  of  New  York  Canals,  1905,  p.  298. 


96  FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [420 

consider  her  canals  solely  as  a  revenue  producer,  but  that 
she  should  rather  manage  them  for  the  needs  of  commerce 
and  of  the  whole  people.  Commercial  interests  had  for 
some  time  been  trying  to  secure  a  free  canal  system,  and 
in  1877  the  auditor  favored  the  plan  on  the  ground  that  al- 
though expenditures  had  exceeded  the  revenue,  yet  the  state 
owed  by  far  the  largest  share  of  her  prosperity  to  the  canal. 
The  controlling  factor  in  the  situation  seems  to  have  been 
that  the  competition  of  the  railroads  had  forced  tolls  down 
to  such  a  point  that  the  canals  were  no  longer  paying  ex- 
penses. The  amount  of  tonnage  carried  by  the  canals  in 
1878  was  exceeded  only  by  the  good  years  of  1861,  1862, 
and  1863,  in  spite  of  the  fact  that  the  railroads  had  placed 
rates  down  to  their  lowest  point.  The  rate  in  1874  was 
eight  cents  per  bushel  from  Buffalo  to  New  York,  and  at 
one  time,  in  1878,  it  fell  as  low  as  four  and  one-half  cents. 
In  1880  the  railroads  carried  about  three-fourths  of  the 
aggregate  tonnage.  Under  the  constitutional  limitation  of 
the  amount  of  canal  receipts  applicable  to  the  payment  of  re- 
pairs and  maintenance,  no  fund  was  left  for  extraordinary 
repairs,  and  in  case  of  some  unforeseen  calamity  there  was 
constant  danger  of  the  canal  traffic  being  closed.  In  1879 
the  rates  were  the  lowest  in  the  history  of  the  canal.  An- 
other factor  in  the  situation  was  the  fear  of  Canadian  com- 
petition. In  1 88 1  the  aggregate  revenues  were  lower  than 
at  any  time  since  1825 ;  for  the  first  time  in  fifty-six  years 
no  payment  could  be  made  to  the  sinking  fund,  and  in  fact 
the  revenues  were  20  per  cent  below  the  cost  of  maintenance. 
If  this  continued,  the  canals  would  have  to  cease  operation 
from  lack  of  funds.  Two  plans  were  possible:  either  re- 
lieve the  revenues  from  contributing  to  the  payment  of  the 
canal  debt,  or  abolish  all  tolls  and  maintain  the  canals  by 
taxation.  The  latter  plan  was  adopted  by  constitutional 
amendment  in  1882  by  a  vote  of  486,105  to  163,151,  and 


421] 


INTERNAL  IMPROVEMENTS 


97 


from  this  time  on  the  canals  became  a  source  of  expenditure 
rather  than  a  source  of  revenue. 

We  have  seen  that  instead  of  the  canals  regulating  the 
railroads'  rates,  the  railroads  regulated  the  canal  tolls,  and 
forced  them  down  to  such  a  point  that  the  canals  no  longer 
paid  operating  expenses.  The  policy  of  managing  the 
canals  during  the  two  decades  (1860-1880)  was  unprogres- 
sive.  Aside  from  enlarging  the  prisms  and  locks,  the  same 
antiquated  methods  and  appliances  were  still  in  use.  Steam 
transportation  upon  the  canals  had  proven  to  be  a  failure. 
In  a  word,  the  canals  could  not  compete  with  the  progressive 
railroads. 

After  January  ist,  1883,  no  tolls  were  collected  upon  the 
canals.  The  offices  of  collector  of  tolls,  weigh-masters,  and 
assistants,  were  abolished.  Also  the  offices  of  canal  ap- 
praiser, and  state  board  of  audit  were  abolished,  and  a 
board  of  claims  was  established.  The  duties  of  canal  au- 
ditor were  transferred  to  the  comptroller's  office.  The  net 
result  of  the  canal  operation  is  given  in  the  following  tables: 

The  following  summary  is  taken  from  the  canal  auditor's 
report  for  September  30,  1882.  It  gives  the  total  statement 
of  receipts  and  payments  for  the  years  181 7  to  1882,  on  ac- 
count of  all  the  state  canals,  railroads  and  of  the  Oneida 
River  improvement: 


Receipts 


Avails  of 

Canal  Certifi- 

Temporary 

Loans 

Loans 

cates  Issued 

Loans 

Tolls 

$64,735,552 

$65,615,146 

$1,512,391 

$3,406,467 

$134,566,108 

Taxes 

Vendue 

Salt  Duty 

Steamboat  Tax 

Sales  0/  Land 

$39,015,444 

$3,592,039 

$2,055,458 

$73,510 

$320,538 

Int.  on  Dep. 

Rent,  Surplus 

Gen  Fund 

Erie  &*  Cham. 

Erie  &' Cham. 

^  Investments 

Water 

Deficiency 

Feeder 

Deficiency 

$6,068,951 

$138,824 

$1,386,499 

$290,097 

$10,486,360 

Miscellaneous 

Total 

$2,939,442 

$271,467,274 

98  FINANCIAL  HISTORY  OF  NEW  YORK  STATE     [422 

Payments 

Principal  Temporary  Interest  on  Canal 

Loam  Premium                   Loans  Loans  Commissioners 

$55,752,192  $743,611              $3,406,467  $47,246,868  $84,043,752 

Seneca  E.  &'  C.                   General  General  Fund  Defieiencies 

Nav.  Company  Feeder                      Fund  Debt  Lateral  Canals 

$53,572  $290,097             $5,015,774  $13,834,637  $10,486,360 

Purchase  Canal  Exp.  Coll.  Weigh- 

Oneida  CI  Repairs           Superintendence  &=  Inspectors  masters 

$50,000  $8,147,809           $28,080,850  $3,074,673  $407,520 

Miscellaneous  Total 

$7,138,049  $267,772,533 

Sinking  Funds    $3,694,741 

$271,467,274 

The  following  table  shows  the  total  operations  of  all 
canals  from  their  beginning  to  September  30,  1882 :  ^ 

Cost  of  Con- 
Canal  Cost  of  Loss  in  Profits  in        siruction  A* 
Canals                Revenues        Operating       Operating       Operating     Improvements 

Baldwinsville  . . .  $1,261  $18,039  (J5i6,777                             131,000 

Black  River  ... .  30i»099  1^1,552,230  $1,251,131  $3,894,952 

Cayuga  Inlet ....  8,837  994  ^^7,843             2,020 

Cayuga  &  Sen....  1,054,356  1,027,539  26,817       1,834,184 

Champlaiuc 6,416,341  5,630,023  786,318      4,913,296 

Chemung 525,565  2,022,259  1,496,694                           1,463,586 

Chenango 744.027  2,081,739  1,337.712                          4.789.471 

Crooked  Lake .. .  45,49©  424,658  379,168                              359.092 

Erie 121,461,871  29,270,301  92,191,570    49.591,853 

Genessee   860,165  2,814,809  1,954,644                          6,737,430 

Oneida  Lake ... .  65,894  144,061  78,167                              511,649 

Oswego 3.708,548  3.371.446  337.102      4.295.373 

Oneida  Lake .... 

Improvement  ...  217,100  41,170  '75.930         ^24,072 

Sen  River  Towing 

Path    7,770  20  7,751              1,603 

Total! $135,418,324  $48,399,288  $6,514,293  $93,533,331  $78,685,581 

*  Assembly  Document,  1906,  vol.  v,  p.  1068. 


CHAPTER  VI 
Internal  Improvements. — Part  III 

The  immense  traffic  between  the  western  states  and  the 
Atlantic  seaboard  during  the  decades  1880  to  1900  caused 
the  question  of  cheap  transportation  to  become  one  of  na- 
tional importance.  The  Erie  Canal  was  directly  beneficial 
to  at  least  20,000,000  people  in  twelve  western  states,  and 
these  were  interested  in  its  improvement  and  maintenance. 
It  was  also  felt  that  the  only  hope  of  the  people  to  regulate 
freight  charges  lay  in  the  Erie  Canal.  Albert  Fink,  an  ac- 
knowledged authority  on  railroad  management  made  the 
statement  that  the  rates  from  all  the  interior  cities,  such  as 
St.  Louis,  Indianapolis  and  Cincinnati  were  affected  and 
held  in  check  by  the  competition  of  waterways.  It  was  also 
quite  generally  conceded  that  the  Erie  Canal  as  it  existed 
in  1882  was  inadequate  to  handle  the  increasing  traffic  and 
control  the  rates.  It  was  universally  felt  that  some  radical 
change  must  be  made,  but  opinions  differed  widely  as  to 
what  changes  were  advisable. 

The  discussion  was  participated  in  by  prominent  engi- 
neers and  papers  were  presented  before  learned  societies 
discussing  the  various  commercial  and  engineering  aspects 
of  the  problem.  At  the  annual  meeting  of  the  American 
Society  of  Civil  Engineers,  in  1884,  State  Engineer  Sweet 
presented  a  project  for  an  18- foot  ship  canal  following  the 
general  route  of  the  Erie  Canal.  The  cost  was  roughly  esti- 
mated at  from  $125,000,000  to  $150,000,000.  In  1890,  Dr. 
Corthell  read  a  paper  before  the  Western  Society  of  Civil 
423]  99 


100       FINANCIAL  HISTORY  OF  NEW  YORK  STATE     [424 

Engineers  in  which  he  summarized  the  various  routes  and 
projects  which  had  been  proposed.  Some  condemned  the 
ship  canal  as  being  antiquated  and  doomed  to  be  superseded 
by  the  railroads;  others  suggested  relief  by  improving  boat 
engines  so  as  to  increase  the  speed ;  others  advised  deepening 
the  canal  and  lengthening  the  locks;  while  some  even  pre- 
ferred to  make  use  of  the  Canadian  system  which  was 
nearly  300  miles  shorter  from  Chicago  to  Liverpool. 

The  matter  received  the  serious  attention  of  Congress. 
In  1885,  a  bill  was  pending  for  federal  aid  to  the  state  to 
the  extent  of  $5,000,000,  on  the  condition  that  the  state 
should  maintain  a  depth  of  nine  feet  in  the  canal,  with  locks 
of  double  length  and  a  free  waterway  to  the  commerce  of 
the  United  States.  In  1889,  Captain  Palfrey,  Corps  of  En- 
gineers, U.  S.  A.,  published  a  report  of  estimates  and  sur- 
veys for  a  2 1 -foot  canal  on  two  routes  from  Lake  Ontario 
to  Niagara  River,  and  a  bill  was  introduced  into  Congress 
providing  for  a  commission  to  select  one  of  these  routes; 
$1,000,000  was  to  be  appropriated  for  construction  pur- 
poses. In  1892,  the  subject  of  ship  canals  was  again  con- 
sidered, but  no  legislation  resulted.  In  1895,  ^^^  president 
appointed  a  deep-waterways  commission  to  consider  canal 
projects,  and  the  following  year  the  secretary  of  war  de- 
tailed Major  T.  W.  Symons  to  prepare  a  report  on  the  cost 
of  the  ship  canal  from  the  Great  Lakes  to  the  Hudson  River. 
This  report  favored  the  enlargement  of  the  Erie  Canal. 
Again,  in  1897,  the  president  appointed  a  United  States 
board  of  engineers  on  deep  waterways  to  make  exhaustive 
surveys  of  the  routes  from  the  Great  Lakes  to  tidewater, 
and  during  this  and  the  following  years  $485,0:00  was  spent 
for  this  purpose. 

The  state  legislature  was  halting  and  uncertain  in  its  ap- 
propriations. From  time  to  time  appropriations  were  made 
for  lengthening  locks,  cleaning  out  the  silt  and  for  repairing 


425]  INTERNAL  IMPROVEMENTS  1 01 

thewallsof  the  prism,  and  various  methods  of  increasing  the 
efficiency  of  the  existing  sytem  were  tested  and  tried.  Num- 
erous projects  were  before  the  legislature  to  increase  the 
water  supply  by  means  of  additional  feeders,  dams  and 
reservoirs,  and  small  appropriations  were  made  for  such 
purposes.  The  work  of  lengthening  locks  began  in  1884, 
and  by  1891  thirty-eight  locks  had  been  lengthened,  leaving 
34  unimproved.  In  1891,  the  legislature  failed  to  grant 
the  necessary  appropriation  for  this  purpose,  but  instituted 
an  investigation  into  the  management  of  the  canals  for  the 
preceding  eleven  years.  This  committee  reported  that  not 
a  dollar  had  been  unnecessarily  appropriated  or  otherwise 
than  carefully  expended/ 

The  first  official  presentation  of  what  is  practically  the 
present  1,000-ton  barge  canal  appeared  in  the  annual  report 
of  State  Engineer  Schenck  for  1892.  He  there  pointed  out 
that  the  canal  "  ought  to  be  one  capable  of  bearing  barges 
250  feet  in  length  and  25  feet  breadth  of  beam  of  a  draft 
not  exceeding  10  feet  and  of  such  a  height  that  the  great 
majority  of  bridges  that  should  span  the  canal  might  be 
fixed  structures  instead  of  draw-bridges."  * 

The  other  officials  also  joined  in  urging  improvements. 
The  Constitutional  Convention  of  1894  contained  an  amend- 
ment providing  that  the  canals  might  be  improved  in  such  a 
manner  as  the  legislature  should  provide  by  law,  and  that 
a  debt  might  be  authorized  for  that  purpose,  or  the  cost  of 
such  improvement  might  be  defrayed  by  the  appropriation 
of  funds  from  the  state  treasury,  or  by  equitable  annual 
tax.^  While  this  amendment  conferred  no  additional  power 
upon  the  legislature,  its  passage  by  a  majority  of  115,343 
was  taken  as  an  expression  of  public  approval,  and  the  legis- 
lature immediately  set  to  work  to  improve  the  canal. 

1  History  of  Canals,  1905,  p.  340. 

*  Ihid.,  p.  345.  »  Art.  vii,  sec.  10. 


•  i. »», 


I02        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [426 

The  national  government  had  deepened  the  channel  from 
Chicago  to  Buffalo  to  20  feet,  and  the  Hudson  River  to  12 
feet,  whereas  the  Erie  Canal  remained  7  feet  deep.  Further- 
more, Canada  was  preparing  to  deepen  the  Chicago-Mon- 
treal Canal  route  from  12  feet  to  20  feet. 

In  1895,  Mr.  Clarkson  introduced  a  bill  providing  for 
the  issuance  of  $9,000,000  of  4  per  cent  bonds,  payable  in 
17  years,  to  be  sold  at  not  less  than  par,  in  lots  of  not  more 
than  $4,000,000  at  a  time.  The  premiums  received  were  to 
be  applied  to  the  sinking  fund,  and  an  annual  tax  of  thirteen 
one-hundredths  of  a  mill  was  authorized  for  a  sinking  fund. 
The  bill  was  submitted  to  the  people  at  the  general  election 
and  was  ratified  by  a  majority  vote  of  276,886.  The  comp- 
troller, in  1896,  advertised  for  a  bond  sale  of  $2,000,000 
and  $1,770,000  of  three  per  cent  bonds  payable  in  ten  years 
were  sold  at  a  premium  of  $10,378. 

A  careful  survey  of  the  454  miles  of  canal  was  imme- 
diately instituted  and  contracts  were  let  to  the  amount  of 
$3,500,000.  The  superintendent  of  public  works  construed 
the  "  Nine-Million  Act  "  to  mean  that  it  could  be  used  only 
on  the  Erie,  Oswego  and  Champlain  canals,  and  in  his 
view  the  appropriation  was  available  only  for  the  necessary- 
rebuilding  of  old  structures,  the  restoring  of  strength  to  the 
canal,  and  for  putting  it  into  good  condition.  The  aim  in 
view  was  the  reduction  of  the  traction  power  necessary  to 
propel  boats  along  the  canal.  The  Cleveland  Steel  Canal 
Boat  Company  had  put  in  commission  a  fleet  of  steel  canal 
boats  consisting  of  one  steamer  and  five  consorts,  which 
made  the  trip  from  New  York  to  Cleveland  in  ten  to  twelve 
days,  and  it  was  believed  that  they  would  successfully  com- 
pete with  the  railroads. 

A  change  was  made  in  the  method  of  making  canal  ap- 
propriations. Instead  of  the  customary  special  appropria- 
tion for  special  purposes,  a  general  tax  of  one-tenth  of  a 


^27]  INTERNAL  IMPROVEMENTS  103 

mill  was  levied,  which  was  expected  to  yield  about  $425,ock). 
Of  this  amount  $50,000  was  devoted  to  the  installation  of  a 
general  system  of  electric  communication  on  the  canals  and 
the  remainder  was  available  to  each  division  for  use  in  ex- 
traordinary repairs  and  improvements.  Under  this  blanket 
appropriation  for  each  division  the  canals  were  considered 
to  be  in  a  better  condition  than  they  had  been  for  thirty 
years  past. 

During  the  latter  part  of  1897  it  became  evident  that  the 
"  Nine-Million  Act  "  would  not  be  sufficient  to  complete  the 
work,  and  rumors  of  fraud  and  extravagance  were  circu- 
lated. A  commission  was  appointed  to  investigate.  The 
report  contained  numerous  criticisms  of  both  the  state  engi- 
neer and  the  superintendent  of  public  works.  The  former 
was  charged  with  having  made  estimates  based  upon  insuffi- 
cient data,  while  the  latter  was  criticized  for  making  extra- 
vagant and  unnecessary  expenditures.  It  also  stated,  however, 
that  the  new  work  was  well  done,  that  prices  were  reason- 
able, and  that  contracts  were  let  to  the  lowest  bidder,  and  it 
recommended  the  continuation  of  the  work  regardless  of 
cost.  The  real  blame,  however,  in  this  case,  seems  to  have 
rested  upon  the  legislature.  The  original  estimate  made  by 
the  state  engineer  was  merely  a  guess,  based  upon  insuffi- 
cient data,  but  the  estimate  was  for  $11,573,000,  with  an- 
other million  for  repairing  walls.  The  legislature  reduced 
this  to  $9,000,000,  without  consulting  the  engineer.  The 
result  of  the  complete  survey  was  to  raise  the  estimate  to 
$16,000,000.  It  seems  clear,  then,  that  there  never  was 
"  any  authority  for  supposing  that  this  $9,000,000  would 
be  enough  to  complete  the  work."  The  superintendent  of 
public  works  was  suspended  from  office  during  the  judicial 
inquiry  into  his  official  acts.  In  1899,  Governor  Roosevelt 
appointed  Austin  G.  Fox  and  Wallace  Macfarland  as  addi- 
tional counsel  to  assist  the  attorney-general  in  examining 


I04       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [428 

the  case,  and  the  legislature  appropriated  $200,000  to  defray 
the  expenses  of  the  inquiry.  The  report  submitted  was  to 
the  effect  that  while  there  was  evidence  of  conduct  justify- 
ing severe  criticism  and  public  indignation,  there  was  not 
enough  to  warrant  criminal  proceedings.  A  large  number 
of  contracts  were  suspended  on  account  of  the  insufficiency 
of  the  $9,000,000  appropriation,  but  no  official  had  power 
to  adjust  these  under  existing  laws.  In  1899,  the  canal 
board  was  given  this  power.  In  some  cases  it  was  found 
that  double  prices  had  been  charged  for  excavated  material 
which  was  used  in  strengthening  canal  banks,  and  in  other 
cases  large  claims  for  extras  and  damages  had  been  formu- 
lated which  it  was  the  intention  of  the  contractors  to  present 
for  payment  to  the  court  of  claims  after  the  settlement 
had  been  made  by  the  canal  board.  To  obviate  this,  con- 
tractors were  required  to  sign  a  release,  which  discharged 
the  state  from  all  future  claims  resulting  from  the  termina- 
tion of  their  contracts. 

Governor  Roosevelt  now  appointed  a  committee  com- 
posed of  prominent  business  men,  engineers  and  city  offi- 
cials, of  which  General  F.  V.  Greene  was  chairman,  to  con- 
sider the  whole  canal  question  and  report  upon  the  proper 
policy  to  be  pursued  by  the  state  in  the  future.  This  com- 
mittee reported  in  1900,  and  recommended  the  enlargement 
of  the  Erie  Canal  to  a  depth  of  12  feet,  a  bottom  width  of 
75  feet,  and  locks  310  feet  long  and  28  feet  wide.  $200,000 
was  appropriated  for  making  the  survey,  and  the  state  en- 
gineer reported  the  results  of  this  survey,  giving  estimates 
for  five  routes,  the  costs  of  which  varied  from  $25,000,000 
to  $110,000,000.  In  1903,  the  legislature  passed  the  Barge 
Canal  Act,  which  was  approved  by  the  people  at  the  general 
election  by  a  majority  vote  of  245,312. 

The  dimensions  of  the  new  canal  were  to  be  75  feet  wide 
at  the  bottom,  12  feet  deep  and  at  least  1,128  square  feet  of 


429]  INTERNAL  IMPROVEMENTS  105 

water  cross-section.  The  locks  were  to  be  328  feet  long  by 
28  feet  wide,  with  11  feet  of  water  on  the  miter  sills.  The 
width  of  the  locks  was  later  increased  to  45  feet.  The  route 
was  by  way  of  the  Hudson  River  from  Troy  to  Waterford, 
thence  by  New  Channel  to  the  Mohawk,  above  Cohoes  Falls, 
and  up  the  canalized  Mohawk  to  Rome,  thence  down  the 
valley  of  Wood  Creek,  across  Oneida  Lake,  down  Oneida 
River  to  Three  River  Point,  and  up  Seneca  River  to  the 
mouth  of  Crusoe  Creek,  thence  by  new  route  to  the  existing 
canal  at  Clyde,  from  which  place  the  line  of  the  existing 
canal  was  to  be  followed  generally  to  the  Niagara  River  at 
Tonawanda,  and  by  this  river  and  Black  Rock  Harbor  to 
Lake  Erie.^ 

The  act  provided  for  the  issuance  of  18-year  bonds  to  an 
amount  not  exceeding  $101,000,000,  and  of  which  not  more 
than  $10,000,000  could  be  issued  at  any  one  time.  An  an- 
nual tax  of  twelve  one-thousandths  of  a  mill  was  imposed 
for  each  million  of  dollars  outstanding  in  any  fiscal  year. 
The  bonds  bore  three  per  cent  interest  and  could  not  be  sold 
below  par.  The  first  issue  of  $2,000,000  was  made  in  1905, 
and  these  become  due  in  1923.  The  premium  received 
amounted  to  $46,260.  An  amendment  to  the  constitution  in 
1905,  extended  the  term  for  which  state  bonds  might  be 
issued  from  18  years  to  one  not  exceeding  fifty  years.  The 
cost  of  the  two  plans  computed  for  $101,000,000  is  as  fol- 
lows: 

18-year  term      50-year  term 

Amount  to  be  raised  for  principal  $77,644,407  $44,770,765 

Amount  to  be  raised  for  interest  54,540,000  151,500,000 

$132,184,407         $196,270,765 

Annual  instalment  to  sinking  fund $7,343,578  $3,925,415 

Tax  rate  on  each  $1,000  of  real  estate 9i79  49.0^ 

*  History  of  Canals,  1905,  p.  396. 


Io6       FINANCIAL  HISTORY  OF  NEW  YORK  STATE     [430 

It  is  thus  seen  that  the  cost  of  the  bond  issue  maturing  in 
eighteen  years  will  be  less  by  $64,ooo,(XX)  than  a  fifty-year 
bond  issue,  yet  the  annual  charge  will  be  greater  by  $3,418,- 
163.  The  people  have  approved  the  policy  of  lessening 
their  yearly  burden  by  extending  the  time  of  payment,  and 
thereby  obligating  another  generation  to  contribute  toward 
the  construction  of  the  barge  canal.  All  bonds  issued  after 
1905  under  this  act  are  fifty-year  bonds. 

In  order  to  comply  with  the  constitution,  which  provides 
that  payment  must  be  made  within  two  years  after  the 
passage  of  an  appropriation,  the  balance  unexpended  has  to 
be  reappropriated  at  the  end  of  every  two  years. 

At  a  general  election  in  1909  the  issue  of  $7,000,000  of 
bonds  was  authorized  for  the  construction  of  the  Cayuga 
and  Seneca  Barge  Canal.  Bonds  to  the  amount  of  $1,000,- 
000  had  been  issued  and  expenditures  aggregating  $30,129 
had  been  encouraged  for  preliminary  engineering  expenses 
by  1910. 

In  1906,  on  account  of  the  prosperous  condition  of  the 
treasury,  it  was  considered  expedient  to  abandon  the  direct 
tax  authorized  to  provide  for  the  sinking  funds,  and  from 
that  time  down  to  191 1  contributions  to  the  canal  debt  sink- 
ing fund  were  paid  out  of  the  general  fund.  These  contri- 
butions amounted  to  $19,356,917  for  the  years  1906  to 
19 10,  and  they  constituted  such  a  burden  on  the  general 
fund  that  a  return  to  the  direct  tax  became  necessary  in 
1911. 

The  constitution  provides  that  a  tax  shall  be  levied  every 
year,  for  sinking  fund  purposes,  until  the  sinking  fund  is 
provided  for  or  the  debt  canceled.*  It  does  not  fix  the 
amount  of  this  annual  tax  nor  does  it  contain  any  provision 
preventing  the  accumulation  of  a  sinking  fund  in  a  shorter 

>  Art.  vii,  sec.  4. 


431  ]  INTERNAL  IMPROVEMENTS  107 

period  of  time  than  fifty  years,  although  it  is  evidently  the 
intention  of  the  constitution  to  relate  the  sinking  fund  con- 
tributions to  the  full  term  of  the  bonds  issued.  Under  the 
operation  of  the  law  no  allowance  has  been  made  for  the 
increase  in  assessed  valuation  of  real  and  personal  prop- 
erty which  would  proportionately  decrease  the  rate  to  be 
levied  for  sinking  fund  purposes,  and  this  has  resulted  in  an 
excess  accumulation  in  the  canal  sinking  fund  of  $15,347,- 
840  and  similar  excesses  in  the  other  sinking  funds.  This 
condition  of  affairs  was  pointed  out  by  Comptroller  Wil- 
liams in  his  annual  report  in  19 10,  but  no  attention  seems 
to  have  been  paid  to  the  matter.  On  December  31,  1912, 
the  total  amount  in  the  canal  sinking  fund  was  $17,907,324, 
whereas  the  amount  should  have  been  only  $2,559,484, 
which  makes  a  total  excess  accumulation  of  $15,347,840. 
The  total  excess  in  all  the  sinking  funds  amounted  to  $18,- 
773,046.' 

The  canal  debt  on  December  31,  19 12,  was  $69,407,660. 
There  were  $58,393,000  worth  of  bonds  authorized  for 
canal  purposes  not  yet  issued.  The  total  expenditure  by  the 
state  for  all  canal  purposes  for  the  year  ending  September 
30,  1912,  was  $25,824,527,  distributed  as  follows:  con- 
struction purposes,  $16,001,592;  maintenance  and  repairs, 
$1,311,212;  canal  debt  sinking  fund,  $8,511,722.'  The 
canal  debt  sinking  fund  contributions  for  191 2,  payable 
from  the  proceeds  of  the  state  tax,  were  $4,442,263.  The 
total  contributions  to  all  sinking  funds  amounted  to  $6,657,- 
883.* 

*  Committee  of  Inquiry's  Report  on  Sinking  Funds,  191 3,  p.  5. 
'  A.  R.,  Comptroller,  1913,  p.  10. 
^  Ibid.,  p.  II. 


Io8       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [432 

Conclusion 

The  question  as  to  whether  the  state  is  exercising  its 
proper  function  in  engaging  in  business  activities  is 
to-day  largely  an  academic  question.  It  is  generally  ad- 
mitted that  there  is  absolutely  nothing  which  the  whole 
community  wants  which  it  has  not  the  right  to  obtain  by 
state  means.  The  real  question  involved  is  that  of  expedi- 
ency. Is  it  advisable  or  expedient  for  the  state  to  conduct 
these  enterprises  ?  This  question  resolves  itself  largely  into 
the  question  of  cost  of  service  and  value  of  service.  Will 
the  state  be  able  to  conduct  an  enterprise  so  as  to  decrease 
the  cost  and  to  furnish  equivalent  or  better  service  than 
under  private  management  ? 

If  we  were  to  pass  judgment  upon  the  success  of  the 
Erie  Canal,  wholly  with  reference  to  its  influence  in  stimu- 
lating trade  and  industry  and  increasing  the  wealth  of  the 
state,  and  to  its  effect  upon  the  nation,  our  judgment  would 
be  one  of  unbounded  approval  and  approbation.  This  great 
waterway  has  well  earned  the  praise  and  support  of  every 
citizen.  It  stimulated  the  development  of  a  wild  frontier 
country,  built  up  a  great  industrial  zone  across  the  state, 
and  made  New  York  City  the  commercial  metropolis  of  the 
new  world.  Western  New  York  grew  from  a  backward 
frontier  country  to  be  the  equal  of  the  eastern  portion  of 
the  state  in  value  of  real  estate  per  capita  and  in  percentage 
of  population  engaged  in  navigation,  and  to  surpass  it  in 
the  abundance  of  saw  mills  and  grist  mills,  the  percent- 
age of  aliens,  the  percentage  of  population  engaged  in  com- 
merce, and  in  industry.  In  the  two  decades,  1820  and 
1840,  the  percentage  of  persons  engaged  in  manufactures 
and  in  commerce  and  navigation  in  New  York  City  virtually 
doubled.  Its  iron  works  and  cotton  and  woolen  mills  mul- 
tiplied faster  than  in  any  other  section  of  the  state.  Thus 
was  laid  the  foundation  of  its  commercial,  financial  and 


433]  INTERNAL  IMPROVEMENTS  109 

manufacturing  importance.  Every  statistical  measurement 
applied  to  test  the  influence  of  the  canal,  whether  it  be  in- 
crease of  population,  wealth  per  capita,  number  of  manu- 
factures, amount  of  goods  transported  on  the  canal,  growth 
of  exports  and  imports,  growth  of  cities,  number  of  persons 
engaged  in  agriculture,  manufacturing  or  commerce,  all 
testify  to  the  stimulus  of  the  canal. 

The  influence  extended  beyond  the  confines  of  the  state 
and  was  exerted  upon  the  nation  as  a  whole.  It  became  the 
great  artery  of  inland  travel,  linking  the  sympathies  of  the 
great  Northwest  with  the  northern  section  of  the  country. 
Its  value  to  Ohio  and  Michigan  was  second  only  to  that  of 
New  York  State  itself. 

But  after  acknowledging  all  this,  the  question  yet  re- 
mains, whether  or  not  all  these  beneficent  results  might  not 
have  been  obtained  through  private  operation  of  the  canals 
and  at  a  lower  cost  to  the  whole  people. 

In  the  first  place,  the  management  of  the  canals  became 
a  political  matter,  and  each  faction  refused  to  resort  to 
taxation  when  conditions  demanded  it,  and  proceeded  in  a 
headlong  course  of  reckless  expenditure.  In  spite  of  all 
warnings  from  the  governors  and  comptrollers,  the  legis- 
lature adopted  the  reckless  plan  of  borrowing  sums  as  long 
as  the  revenues  of  the  state  were  sufficient  to  pay  the  inter- 
est on  the  loan  and  no  provision  was  made  for  paying  the 
principal.  New  canals  were  authorized  which  it  was  almost 
certain  would  not  pay  interest  or  running  expenses.  Dur- 
ing the  later  years  the  appointments  of  canal  officials  were 
made  more  with  reference  to  their  political  affiliations  than 
with  reference  to  their  fitness  to  carry  on  the  work  entrusted 
to  them.  Contracts  were  awarded  on  similar  principles  and 
awards  to  cover  losses  of  inefficient  contractors  were  of  fre- 
quent occurrence. 

In  the  second  place,  there  was  almost  a  total  absence  of 


no       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [434 

an  adequate  financial  plan.  The  canal  fund  was  in  no  sense 
a  sinking  fund,  because  the  amount  of  the  fund  bore  no> 
definite  relation  to  the  amortization  of  the  principal  and 
payment  of  the  interest.  No  provision  was  made  for  the 
payment  of  the  principal  of  loans  prior  to  1846.  After  the 
establishment  of  permanent  sinking  funds,  the  money  in 
them  was  invested  in  taxes  which  had  not  been  levied  and 
the  funds  were  used  for  present  needs.  Too  great  reliance 
was  placed  on  the  revenue  from  tolls,  and  furthermore  the 
plan  of  defraying  the  expenses  of  construction  out  of  cur- 
rent revenues  was  unwise.  It  forced  the  canals  to  a  sort  of 
hand-to-mouth  existence,  and  rendered  impossible  any  ex- 
tensive scheme  which  would  fit  the  canals  for  the  work  for 
which  they  were  needed.  The  legislature  resorted  to  various 
methods  to  evade  the  difficulty,  which  should  have  been 
remedied  by  an  amendment  to  the  constitution.  Moneys 
were  diverted  from  the  sinking  fund,  appropriations  were 
made  in  excess  of  the  constitutional  surplus  allowed,  and  a 
floating  debt  was  contracted  in  excess  of  the  debt  limitation. 
The  legislature  revealed  a  total  lack  of  appreciation  of 
financial  affairs  in  failing  to  take  account  of  the  necessary 
expenses  of  repairs  and  running  expenses  of  the  canal  in 
spite  of  the  fact  that  these  were  clearly  pointed  out  at  the 
time  by  governors  and  comptrollers.  This  lack  of  any  well- 
organized  financial  scheme  made  any  comprehensive  engi- 
neering project  impossible.  The  result  was  that  preliminary 
estimates  were  invariably  too  low,  due  to  changes  and  ad- 
ditions and  the  more  expensive  character  of  the  work  as  it 
developed. 

In  nearly  every  case  the  estimated  cost  of  canals  was  far 
below  the  actual  cost.  For  example,  the  estimated  cost  of  the 
original  Erie  Canal  was  $4,881,738,  while  the  actual  cost 
was  $7,143,790.  The  estimate  of  the  cost  of  the  original 
Oswego  Canal  was  $227,568,  while  the  actual  cost  was 


435]  INTERNAL  IMPROVEMENTS  III 

$565,437.  The  estimated  cost  for  the  enlargement  of  the 
Erie  Canal  was  $23,402,863,  in  1836,  and  the  actual  cost 
in  1862  was  $31,834,041.  Plans  were  drawn  up  on  insuffi- 
cient data  and  every  change  or  alteration  was  made  at 
greatly  increased  cost.  This  was  repeated  over  and  over 
again  in  the  history  of  the  canal  construction  of  the  state. 

The  two  branches  of  the  legislature  disagreed  over  minor 
details,  with  the  result  that  adjournment  would  come  before 
suitable  provisions  were  made.  Appropriations  were  so 
made  as  to  leave  the  work  unfinished  at  the  expiration  of  the 
appropriation,  and  thus  in  order  to  secure  the  benefit  of 
sums  already  expended  other  sums  had  to  be  raised  to  com- 
plete the  work.  The  delays,  extensions  and  additions  result- 
ing in  extra  charges,  the  disputes  over  changes,  political  in- 
trigue and  interference  and  the  cost  of  legislative  investiga- 
tions all  tended  to  increase  the  cost  of  construction. 

The  third  great  mistake  in  management  was  the  utter  lack 
of  any  responsibility  on  the  part  of  those  who  managed  af- 
fairs. The  canal  board  would  lay  the  blame  on  the  canal 
commissioners,  the  canal  commissioners  would  shift  the 
blame  to  the  engineers  and  superintendents,  and  these 
would  shift  it  back  upon  the  canal  commissioners.  It  was 
only  after  years  of  wasted  efifort  that  the  work  was  placed 
under  a  superintendent  of  public  works,  who  was  directly 
answerable  to  the  people  for  his  acts.  The  idea  that  power 
and  discretion  should  be  adequate  to  secure  the  end  in  view 
is  now  but  slowly  coming  to  be  adopted  in  public  affairs. 

The  third  evil  was  the  cause  of  the  fourth,  namely, 
fraud  and  corruption.  Investigation  after  investigation 
showed  that  the  public  interests  were  systematically  disre- 
garded. Time  after  time  the  canal  commissioners  issued 
drafts  after  they  had  been  notified  that  no  funds  were  avail- 
able for  the  work,  and  these  led  to  deficiencies  which  had  to 
be  provided  for  by  direct  taxation.     Superintendents  pur- 


112        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [436 

chased  supplies  from  private  firms  instead  of  public  letting. 
Originally  contract  were  not  let  to  the  lowest  bidder;  but 
even  after  this  was  made  compulsory,  it  was  found  that  the 
lowest  bid  was  often  not  the  most  economical  bid.  Con- 
tractors formed  pools  among  themselves  and  auctioned  off 
the  right  to  bid  to  the  highest  bidder,  who  recouped  him- 
self by  adding  the  cost  to  the  price  of  his  bid.  Charges  of 
favoritism  in  letting  contracts  were  preferred;  much  of  the 
work  done  by  contractors  was  of  a  poor  grade,  and  soon 
fell  into  a  useless  condition ;  while  claims  against  contractors 
were  not  enforced.  Contractors'  profits,  losses  from  imper- 
fect work,  extra  cost  and  cost  of  inspections  and  super- 
vision were  the  results  of  the  contract  system.  Both  sys- 
tems were  tried  and  each  proved  to  be  unsatisfactory. 

Perhaps  the  greatest  losses  resulted  from  the  absence  of 
an  efficient  inspection  department,  which  should  have 
properly  inspected  all  purchases  of  material  as  to  qual- 
ity, amount  and  prices  paid  and  all  completed  work  before 
the  state  paid  for  the  material  and  work.  We  have  now  a 
sound  financial  plan,  but  a  rigid  inspection  department  is 
absolutely  necessary  to  insure  that  the  government  is  receiv- 
ing what  it  is  paying  for.  Claims  against  contractors  should 
be  rigidly  enforced  and  imperfect  work  should  be  rejected. 
Such  a  department  should  be  independent  of  the  construc- 
tion department.  The  state  comptroller,  writing  in  1865, 
says :  "  The  canal  cost  perhaps  twice  as  much  as  it  would 
have  cost  under  private  management." 

Many  of  these  evils  seem  to  be  inseparable  from  any 
scheme  of  governmental  activity;  and  we  shall  do  well  to 
consider  New  York's  experience  in  this  matter  before  we 
enter  upon  further  extensions  of  governmental  ownership 
and  management  of  public  industries.  The  movement  has 
been  from  high  tolls  which  yielded  a  surplus  revenue  to 
free  tolls  and  to  the  scheme  of  defraying  expenses  of  main- 


437]  INTERNAL  IMPROVEMENTS  II3 

tenance  and  operation  by  means  of  taxation.  A  similar 
evolution  has  taken  place  in  the  case  of  public  highways, 
and  we  may  well  ask  the  question  whether  this  would  not 
be  the  inevitable  result  if  the  government  should  acquire 
possession  of  railroads.  The  benefits  derived  from  the 
maintenance  of  public  highways,  canals  and  railroads  are 
to-day  seen  to  be  of  a  more  far-reaching  character  than  was 
supposed  to  be  the  case  in  earlier  times,  and  to-day  these 
benefits  are  so  diffused  as  to  make  taxation  levied  for  these 
purposes  seem  equitable  and  just.  The  real  question  to-day 
is  not  whether  an  equitable  system  of  taxation  can  be  de- 
vised for  raising  the  funds  to  defray  the  expenses  of 
these  public  works,  but  whether  the  money  so  raised  will 
be  economically  and  justly  expended  by  public  officials. 
In  all  industries  which  call  for  the  introduction  of  new 
technical  improvements,  for  the  extensions  of  plant  or  sys- 
tem, changes  of  plans  and  wise  discretion  in  management, 
it  would  seem  unwise  to  allow  such  industries  to  be  managed 
by  governments,  whose  policies  are  subject  to  the  fitful 
changes  of  party  politics.  To  manage  successfully  such 
utilities  as  canals  and  railroads  it  is  necessary  to  devise  some 
comprehensive  plan  requiring  a  long  term  of  years  for  its 
fulfilment,  and  this  is  not  easily  possible  under  govern- 
mental control.  Furthermore,  the  legislature  has  shown 
itself  unfit  to  cope  with  the  intricate  financial  problems 
which  are  involved  in  the  successful  operation  of  such  in- 
dustries. Utilities  such  as  these  which  affect  so  intimately 
the  life  of  everyone  in  the  community  are  sure  to  become 
the  storm  centers  of  political  discussion,  as  has  been  the  case 
in  New  York  State,  and  the  farther  they  can  be  kept  re- 
moved from  the  field  of  politics  the  better  it  will  be  for  the 
people  and  the  state. 


CHAPTER  VII 

Revenues 

Taxation  played  a  very  unimportant  role  during  the  first 
fifty  years  of  the  state's  existence.  The  expenses  of  the 
state  were  small  and  the  revenues  were  obtained  in  other 
ways  than  from  direct  taxation.  The  chief  sources  of  reve- 
nue were  the  receipts  from  the  sale  of  public  lands,  the 
revenue  derived  from  the  investment  of  state  funds  and 
several  indirect  methods  of  taxation  which  had  been  em- 
ployed in  the  state  from  an  early  period,  such  as  auction- 
duties,  lotteries,  pedlar's  licenses,  and  fees  of  public  officers. 

(a)  General  Property  Tax 
Oliver  Wolcott,  Secretary  of  the  Treasury,  reporting  in 
1796  on  state  direct  taxes,  said,  "  that  in  New  York  State 
no  objects  of  taxation  are  defined  in  the  laws  nor  are  any 
principles  of  valuation  described."  ^  Nevertheless,  a  system 
of  taxation  had  grown  up  during  the  preceding  century 
which  was  still  used  whenever  occasion  demanded  it,  and 
which  remained  in  force  practically  unchanged  down  to 
1880.  In  only  two  periods  during  the  first  forty  years  of 
the  history  of  the  state  was  a  general  property  tax  resorted 
to,  and  it  was  levied  in  all  some  fourteen  years.  The  first 
use  made  of  this  tax  was  in  1799,  when  one  mill  was  levied 
upon  the  real  estate  and  personal  property.  This  was  con- 
tinued for  three  years.  The  levy  was  occasioned  by  the  fact 
that  the  state  had  been  borrowing  money  from  banks  to 
meet  its  current  expenses,  and  large  appropriations  had 

*  Schwab,  History  of  General  Property  Tax,  p.  65. 
114  [438 


439]  REVENUES  115 

been  made  for  the  encouragement  of  schools,  which,  owing 
to  lack  of  funds,  had  not  been  paid.  The  second  occasion 
for  the  levying  of  a  direct  tax  was  in  181 5,  when  the  large 
deficit  of  $155,159  appeared  at  the  close  of  the  fiscal  year, 
and  the  rapid  increase  of  the  state's  debt,  which  now 
amounted  to  $1,000,000,  made  such  a  tax  imperative.  This 
tax  was  continued  until  the  final  payment  of  the  debt  in 
1826. 

The  principle  underlying  this  system  of  taxation  seems 
to  have  been  that  of  finding  the  measure  of  the  individual's 
ability  to  pay  taxes  in  the  aggregate  amount  of  property  in 
his  possession.  It  was  thought  sufficient  that  property 
owners  should  allow  the  assessors  to  see  all  their  lands, 
cattle,  and  chattels,  but  no  person  was  obliged  to  give  in  any 
account  of  any  sums  of  money  due  to  him  or  of  his  personal 
property.^  A  self -valuation,  under  oath,  by  the  taxpayers 
was  never  attempted  in  New  York,  as  in  some  of  the  other 
states. 

All  the  defects  of  the  system  early  manifested  themselves, 
but  as  the  tax  rate  was  small  the  burden  upon  the  people 
was  not  heavy.  Either  the  ignorance  or  the  good-will  of 
the  assessor  always  stood  in  the  way  of  assessing  property 
at  its  full  value.  In  1703  laws  were  passed  requiring  "  The 
assessor  to  equally,  duly  and  impartially  make  the  assess- 
ments ".  Later,  in  1764,  an  assessor's  oath  was  required. 
"  Concealment  of  property  was  always  subject  to  heavy  pen- 
alty, but  was  probably  never  enforced."  ^  The  utter  impossi- 
bility of  reaching  the  great  mass  of  personal  property  be- 
came evident  as  soon  as  movable  property  began  to  increase, 
and  as  early  as  1741  laws  were  passed  to  compel  merchants 
to  pay  their  due  proportion  of  the  tax. 

The  general  property  tax  was,  however,  largely  confined 

1  md..  p.  63.  2  Ihid.,  p.  63. 


Il6       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [440 

to  the  towns  and  counties.  Whenever  a  state  tax  was 
imposed  the  sum  was  apportioned  to  the  various  counties, 
and  the  county  supervisors  added  this  to  the  sums  required 
to  be  raised  for  town  and  county  purposes.  The  question 
of  taxation  was  therefore  largely  a  local  matter. 

The  theory  of  the  tax  system  was  that  all  property  ought 
to  be  taxed  according  to  its  value.  This  included,  then,  all 
lands  and  all  personal  property  within  the  state,  whether 
owned  by  an  individual  or  by  a  corporation,  with  the  usual 
exemptions  of  federal  and  state  property,  church  and  school 
property,  prisons,  almshouses  and  charitable  institutions, 
the  property  of  clergymen  up  to  $1,500,  public  libraries,  de- 
posits in  savings  banks  and  accumulations  of  life  insurance 
companies,  and  a  long  list  of  necessary  household  furniture. 

The  statutes  defined  land  or  real  estate  to  include  not 
only  lands  but  buildings,  superstructures  of  all  kinds, 
either  above  or  below  the  surface,  trees,  quarries  and  mines. 
Personal  property  included  all  household  furniture, 
moneys,  goods,  chattels,  debts  from  solvent  creditors,  public 
stocks  and  stocks  in  mining  corporations,  and  such  portion 
of  the  capital  of  incorporated  companies  liable  to  taxation 
on  their  capital  as  was  not  invested  in  real  estate. 

(b)  The  Tax  System 

OMcers. — At  the  town  meetings,  held  on  the  first  Tues- 
day in  April,  a  supervisor,  town  clerk,  three  to  five  assessors, 
one  or  more  collectors,  two  overseers  of  the  poor  and  three 
commissioners  of  highways  were  elected.  The  county  treas- 
urers had  charge  of  the  collection  of  the  sums  from  the 
local  collectors  and  the  county  sheriff  had  power  to  issue 
warrants  against  delinquent  collectors.  The  state  tax  of^- 
cers  were  the  state  comptroller,  treasurer  and  attorney- 
general. 

Assessment. — Personal  property  was  assessed  in  the  town 


441]  REVENUES  1 17 

or  ward  where  the  person  resided.  Lands  were  assessed  in 
the  town  or  ward  where  they  were  situated.  The  tax  rolls 
were  those  of  the  towns  and  wards  which  were  made  up  by 
the  local  assessors,  who  made  a  house-to-house  canvass  for 
this  purpose.  Since  there  was  but  one  assessment  roll,  the 
amount  of  the  tax  which  must  be  raised  from  the  property 
on  any  roll  included  taxes  for  the  support  of  the  state  gov- 
ernment, county  taxes  and  town  taxes.  The  list  contained 
four  columns :  in  the  first  was  listed  the  names  of  taxpayers; 
in  the  second,  the  amount  of  real  estate;  in  the  third,  the 
full  value  of  the  real  estate,  and  in  the  fourth,  the  full  value 
of  all  personal  property  after  deducting  all  debts  owed  by 
the  taxpayer. 

The  assessment  lists  were  open  to  inspection  for  twenty 
days,  and  any  aggrieved  taxpayer  could,  during  this  time, 
have  mistakes  corrected  without  going  to  court.  After  the 
lists  had  been  forwarded  to  the  county  officials,  a  correc- 
tion could  be  made  only  through  application  to  the  courts, 
either  by  obtaining  an  injunction  to  restrain  collection  or  a 
writ  of  certiorari,  in  which  petition  the  taxpayer  had  to  set 
forth  that  the  assessment  was  illegal  on  account  of  either 
overvaluation  or  unequal  assessment,  and  that  he  would 
be  injured  in  consequence.  The  latter  provision  was  intro- 
duced in  1880.  Up  to  that  time  no  remedy  existed  against 
overvaluation  of  property.  In  the  absence  of  fraud  or  the 
adoption  of  some  wrong  principles  in  making  an  assessment, 
the  judgment  of  the  assessor  was  conclusive.  This  statute 
has  been  very  important  in  the  interests  of  justice  to  the 
taxpayer. 

The  penalty  for  neglect  to  give  the  desired  information  to 
the  assessors  was  a  fine  of  twenty  dollars,  and  for  false  in- 
formation one  was  liable  to  a  fourfold  assessment.  Persons 
not  satisfied  with  the  assessment  made  on  their  personal 
property  could  make  an  affidavit  as  to  the  amount  they 


Il8       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [442 

owned  and  the  assessors  were  obliged  to  accept  this  state- 
ment. It  is  still  the  annual  practice  in  New  York  City  for 
millionaires  to  appear  before  the  proper  authorities  and 
have  their  personal  property  assessment  reduced  to  a  figure 
named  by  themselves,  under  threat  to  become  non-residents 
of  the  state. 

Valuation. — Real  estate  was  to  be  assessed  by  the  as- 
sessors at  its  true  value  as  they  would  appraise  it  in  pay- 
ment of  a  just  debt  due  a  solvent  creditor.  A  mortgage 
might  be  deducted  from  the  debtor's  personal  property,  but 
not  from  the  valuation  of  the  real  estate.  Railroads  were 
assessed  in  each  town  on  the  portion  lying  within  the  town, 
assessed  at  its  fair  value  as  a  portion  of  the  continuous  road. 
The  actual  working  of  this  law  was  very  unsatisfactory. 

In  assessing  personal  property,  an  attempt  was  made  to 
ascertain  the  value  of  the  property  over  and  above  all  debts. 
Taxpayers  were  not  required  to  furnish  lists  of  their  per- 
sonal property  and  the  practical  method  adopted  was  one  of 
inference  from  their  surroundings.  Wills  and  surrogates' 
offices  were  examined,  inferences  were  drawn  from  the 
situation  of  businesses  and  residences  as  given  in  the  city 
directory,  and  partnerships  were  taken  from  the  newspapers. 
A  corporation's  personal  property  was  obtained  by  deduct- 
ing from  its  paid-up  capital  the  amount  invested  in  real 
estate,  in  stocks  of  other  corporations,  in  stocks  exempted 
from  taxation,  and  the  amount  of  its  capital  owned  by  the 
state  or  other  association  not  liable  to  taxation. 

The  listing  ^  of  personal  property  was  employed  for  a 

*  Grand  lists  of  personal  property,  April,  1799: 

Oxen  over  4  years,  $15.  Horses,  8  to  12,  II20.  Coaches,  $800. 

Cows  over  4  years,  |io.  Horses,  12  to  16,  $8.  Shays,  $700. 

Neat  Cattle,  3  years,  $6.  Mules,  i  year  old,  $8.  Carriages,  $100. 

Horses,  i  year  old,  jJI8.  Mules,  2  year  old,  $16.  Clocks,  $/^o. 

Horses,  2  and  3  years,  1 15.  Mules,  3  years,  $25.  Gold  Watches,  $50. 

Horses,  4  to  8  years,  I30.  Swine,  i  year  old,  $3.  Other  Watches,  |i2. 

Slaves,  12  to  50,  $100.  River  vessels,  30  to  60  tons,  1^500. 


443]  REVENUES  1 19 

few  years  during  the  early  history  of  the  state,  but  it  never 
found  favor  in  this  state,  and  this  early  attempt  was  only 
an  unsuccessful  experiment. 

Equalisation. — The  first  provision  for  the  equalization 
of  taxes  was  the  appointment  by  the  governor  of  three  com- 
missioners of  taxes  in  each  county  to  hear  appeals  for 
wrong  assessment  and  to  equalize  assessments.  In  1801 
this  office  was  abolished,  and  the  duties  were  transferred  to 
the  supervisors  of  the  counties.  The  county  supervisors 
constituted  the  county  board  of  equalization  which  had 
power  to  equalize  the  real-estate  assessments  between  the 
various  towns,  but  it  could  not  reduce  the  aggregate  valua- 
tion of  the  county  and  could  not  revise  the  personal  prop- 
erty assessment.  Each  county  sent  to  the  comptroller 
yearly  the  aggregate  valuation  of  real  and  personal  prop- 
erty of  the  county.  The  State  Board  of  Equalization,  con- 
sisting of  the  lieutenant-governor,  the  speaker  of  the  as- 
sembly, secretary  of  state,  attorney-general,  surveyor- 
general,  comptroller,  treasurer,  and  the  three  state  as- 
sessors, was  created  in  1859  to  remedy  the  evils  arising 
from  under-assessment.  It  had  power  to  increase  or  to  di- 
minish the  aggregate  valuation  of  real  estate  in  any  county 
by  adding  or  deducting  such  sums  as  it  thought  necessary 
to  produce  a  just  relation  between  all  the  valuations  of  the 
real  estate ;  but  the  aggregate  valuation  of  all  counties  could 
not  be  reduced.  Its  revisions  were  also  confined  to  real- 
estate  valuations. 

Rate. — Each  year  the  legislature  fixed  the  rate  of  tax  for 
state  purposes  at  so  many  mills  on  each  dollar  of  valuation. 
The  aggregate  equalized  county  valuations  were  multiplied 
by  this  tax  rate  by  the  state  comptroller,  and  the  result 
was  the  quota  of  the  state  tax  to  be  raised  in  each  county. 
This  amount  was  added  to  the  amount  to  be  raised  in  the 
county  for  county  purposes  and  the  total  was  apportioned 


I20       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [444 

among  towns  and  cities.  Each  town  or  city  then  added  its 
share  of  the  county  and  state  taxes  to  its  own  town  or  city 
tax,  which  was  then  raised  by  the  collector. 

Collection. — The  town  collectors  paid  over  the  sums  col- 
lected by  them  to  the  county  treasurers  and  the  city  cham- 
berlain respectively,  and  these  in  turn  paid  over  the  share 
belonging  to  the  state  to  the  state  treasurer.  The  town  col- 
lectors and  county  treasurers  received  a  certain  percentage, 
varying  from  one  to  five  per  cent  upon  each  dollar  collected. 
The  assessors  and  supervisors  received  a  per  diem  allow- 
ance. 

The  county  sheriff  could,  on  complaint  of  the  county 
treasurer,  prosecute  the  collectors  for  failure  to  pay  over 
the  money  collected,  and  the  comptroller  could  bring 
action  against  the  county  treasurer  for  failure  to  pay 
over  the  state's  portion  of  the  tax.  Collectors  might 
attach  goods  and  chattels  and  sell  them,  and  the  amount 
over  the  tax  was  returned  to  the  person.  Taxes  on 
real  estate  were  a  lien  on  the  property  until  paid,  and  un- 
paid taxes  were  added  to  the  next  year's  taxes.  The  taxes 
that  were  not  paid  within  one  year  could  be  collected 
by  the  attorney-general,  and  if  not  collected  within  a  cer- 
tain time,  the  land  was  sold  for  arrears  of  taxes.  Tax  sales 
for  arrears  of  taxes  were  made  about  every  five  years. 

Practically  no  changes  were  made  in  the  tax  law  until 
the  year  1823,  when  an  attempt  was  made  to  reach  incor- 
porated companies.  The  comptroller  was  ordered  to  inves- 
tigate the  systems  of  taxation  of  banks  and  corporations  in 
other  states  and  to  report  to  the  legislature.  This  report 
showed  a  variety  of  systems  in  operation,  i.  e.,  Massachu- 
setts, New  Jersey  and  Alabama  taxed  banks  by  levying  a 
tax  of  from  one-half  to  one  per  cent  on  the  capital  paid  in ; 
Vermont,  Pennsylvania  and  Ohio  levied  taxes  of  6  per  cent, 
8  per  cent  and  4  per  cent  respectively  upon  dividends,  while 


445]  REVENUES  I2I 

Maryland.  South  Carolina  and  Georgia  levied  20,  12  and  31 
cents  respectively  on  every  $100  of  bank  stock.  The  result 
of  this  investigation  was  the  law  of  1823,  which  included 
bank  stock,  notes,  bonds  and  mortgages  as  taxable  property 
which  were  to  be  assessed  at  their  cash  value.  The  cashiers 
or  secretaries  of  incorporated  companies  were  required  to 
furnish  the  assessor  lists  giving  the  amount  of  real  estate 
owned  and  the  paid-up  capital;  the  tax  was  to  be  paid  by 
the  banks,  which  were  to  deduct  it  from  the  dividends  of 
the  stockholders,  but  10  per  cent  upon  all  dividends  might 
be  paid  in  lieu  of  the  tax.  The  act  provided  that  the  tax 
should  be  divided  among  the  counties  in  proportion  to  the 
amount  of  stock  held  by  stockholders  residing  in  the  sev- 
eral counties;  this  provision  introduced  so  much  needless 
complication  into  the  system  as  to  render  it  almost  impos- 
sible of  successful  operation.  As  a  means  of  obtaining 
revenue  for  the  state  purposes,  the  provision  proved  a  fail- 
ure. In  1823  the  amount  collected  from  incorporated  com- 
panies amounted  to  $91,462,  of  which  amount  $51,565  went 
to  the  counties,  leaving  the  returns  to  the  state  only  $39,898. 
In  1827  and  1828  the  state's  share  amounted  to  $25,867  and 
$28,980  respectively. 

It  is  needless  to  say  that  this  law  was  strongly  opposed 
by  the  banking  interests  who  claimed  ( i )  that  it  was  a  vio- 
lation of  vested  rights  since  they  had  been  chartered  by 
special  acts  of  the  legislature;  (2)  that  it  was  unjust  because 
it  was  a  tax  on  credit  and  that  nominal  capital  did  not  repre- 
sent actual  capital. 

For  years  this  law  continued  on  the  statute  books  but  it 
was  not  enforced  strictly,  and  the  annual  receipts  from  the 
tax  on  incorporated  companies  were  only  a  few  thousand 
dollars. 

Local  Taxation  of  Corporations. — Real  estate  belonging 
to  corporations  was  taxed  where  it  was  located.    Their  per- 


122        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [446 

sonal  property  was  assessed  in  the  town  or  ward  where  the 
principal  office  was  located.  Corporations  were  taxed  upon 
their  capital,  and  were  required  to  make  statements  to  as- 
sessors and  comptrollers  which  furnished  the  basis  for  the 
computation  of  their  capital  stock.  Since  the  corporations 
were  taxed  on  their  capital  stock,  the  stockholders  were  not 
taxed  on  their  stock.  From  the  actual  value  of  the  capital 
stock  together  with  surplus  profits  or  reserve  funds  there 
was  deducted  the  assessed  value  of  all  real  estate  owned, 
the  amount  of  stock  held  by  the  state  and  other  corporations, 
and  United  States  securities. 

Foreign  corporations  were  taxed  upon  all  sums  invested 
in  business  in  the  state.  Telegraph  companies  were  required 
to  furnish  the  comptroller  a  statement  showing  the  total 
length  of  their  lines  within  each  county,  together  with  the 
cost  of  construction  (meaning  reconstruction  cost)  of  their 
lines.  Foreign  fire-insurance  companies  were  taxed  on  their 
capital,  which  was  found  by  deducting  losses,  debts  and  lia- 
bilities and  premiums  from  the  aggregate  of  their  securities, 
mortgages  and  assets.  Banks  were  not  taxed  upon  their 
capital,  but  their  shares  of  stock  were  included  in  the  valua- 
tion of  the  personal  property  of  the  stockholder  in  the  city 
or  ward  where  the  bank  was  located.  Deposits  in  savings 
banks  which  were  due  depositors,  and  the  accumulations  of 
life-insurance  companies  were  not  liable  to  taxation,  other 
than  the  real  estate  and  stocks  which  might  be  owned  by 
the  bank  or  company.  Railroads  were  taxed  locally  with 
very  unsatisfactory  results.  In  1873  the  state  assessor  ex- 
pressed the  opinion  that  there  was  "  no  uniform  rule  for 
any  road  in  any  county  and  that  each  assessor  was  gov- 
erned entirely  by  his  own  view."  A  committee,  reporting 
on  taxation  of  railroads  in  1879,  said,  "  In  certain  towns, 
the  railroads  appear  to  pay  about  one-third  of  the  entire 
taxes,  while  the  assessed  valuation  of  1878  varied  from 


447]  REVENUES  123 

$400  per  mile  to  $100  per  rod.  In  short,  it  is  scarcely  an 
exaggeration  to  say  that  the  assessments  are  as  unlike  as  the 
complexion,  temperament  and  disposition  of  the  assessors."^ 
The  conclusion  of  this  committee  was  that  the  best  way 
to  tax  railroads  was  to  tax  them  on  their  real  property  and 
on  their  gross  receipts. 

The  Breakdown  of  the  General  Property  Tax 
The  question  of  taxation  began  to  assume  importance 
about  1850,  and  continued  to  be  a  vexing  problem  through- 
out the  next  three  decades.  Previous  to  the  year  1842  no 
tax  had  been  levied  for  state  purposes  since  1826,  and  the 
question  of  taxation  was  primarily  a  local  issue.  Beginning 
in  1842,  taxes  had  to  be  levied  to  carry  on  the  enlargement 
of  the  canal,  to  pay  interest  on  the  public  debt,  and  to  pay 
the  current  expenses  of  government. 

During  the  half  century  ending  with  the  Civil  War  the 
average  state  tax  was  about  one  mill  on  the  dollar,  but 
from  this  time  on  until  1880  the  rate  averaged  about  five 
mills.  In  i860  the  tax  rate  was  three  and  five-sixths  mills, 
yielding  $5,440,640,  and  by  1872  it  reached  the  high- water 
mark  of  nine  and  three-eighths  mills,  yielding  $19,580,882. 
The  same  increase  was  shown  in  the  figures  for  the  aggre- 
gate taxation  including  in  this  the  county,  city  and  town 
taxes.  During  the  decade  1850  to  i860,  the  aggregate 
taxation  increased  threefold,  or  from  $6,000,000  to  $18,- 
000,000,  and  by  the  end  of  the  following  decade  the  total 
amount  raised  annually  amounted  to  $50,000,000.  The 
highest  average  tax  rate  for  all  taxes  was  reached  in  1872, 
when  it  amounted  to  3.41  per  cent,  and  over  $63,000,000 
was  raised.  The  per  capita  tax  in  1850  was  $2.03;  in  i860, 
$4.88;  in  1870,  $11.55,  and  in  1880,  $9.66.^ 

*  C.  F.  Adams,  Taxation  of  Railroad  Securities,  p.  8. 
'  History  of  General  Property  Tax,  p.  82. 


124       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [448 

This  marvelous  growth  in  taxation  was  not  peculiar  to 
New  York  State,  but  was  a  general  phenomenon,  witnessed 
in  most  of  the  older  states,  in  the  national  government  and 
in  foreign  countries. 

Governor  Morgan,  in  1859,  called  attention  to  the  ine- 
qualities existing  in  the  valuations  of  both  real  and  per- 
sonal estate,  and  suggested  that  measures  be  adopted  to 
equalize  these  valuations.  In  response  to  this  suggestion 
the  Board  of  Equalization  was  created,  composed  of  the 
commissioners  of  the  land  office  and  of  three  state  as- 
sessors who  were  to  be  appointed  by  the  governor  and  the 
Senate.  This  was  the  first  attempt  to  correct  the  evils  in 
the  tax  system  and  it  failed  to  accomplish  the  result.  It 
was  found  that  about  three-fourths  of  the  tax  was  levied 
upon  real  estate,  whereas  personal  property  largely  escaped. 
The  fault  seemed  to  lie  in  the  methods  of  assessment,  and  in 
1862  a  joint  legislative  committee  was  appointed  to  con- 
sider the  question  of  reforming  the  existing  system  of 
taxation.  This  committee  presented  a  report  together  with 
a  digest  of  the  tax  laws  in  the  various  states.  The  report 
was  in  no  sense  a  remarkable  one,  and  no  action  on  the  part 
of  the  legislature  resulted  from  it.  The  committee  con- 
tented themselves  with  recommending  a  few  amendments  to 
the  present  laws,  but  were  opposed  to  any  radical  change  in 
the  tax  system.  We  quote  their  conclusion  which  was  as 
follows :  "  We  are  satisfied  that  our  people  are  not  yet  pre- 
pared for  a  radical  change  in  this  system  and  it  may  be  that 
we  are  not  old  enough  to  change  it  to  the  true  principle  of 
all  taxation,  namely,  that  all  property,  irrespective  of  owner- 
ship, asking  the  care  of  the  government  should  pay  its  share 
of  the  cost  of  that  care;  we  have,  therefore,  in  the  report 
which  we  present,  contented  ourselves  with  the  introduc- 
tion of  amendments  which  would  tend,  in  our  judgment,  to 


449]  REVENUES  1 25 

remedy  known  and  acknowledged  evils."  ^  We  note  here 
that  the  true  principle  of  taxation  enunciated  was  the  prin- 
ciple of  benefit.  Taxation  was  in  their  opinion  a  payment 
for  the  care  and  protection  of  the  government.  The  evils 
which  the  committee  sought  to  obviate  were  three  in  num- 
ber and  the  remedies  wxre  as  follows:  first,  they  sought 
to  allow  real  estate  owners  who  paid  taxes  upon  all  their 
land  to  subtract  the  tax  paid  on  mortgages  from  the  in- 
terest or  principal  due  upon  the  mortgage,  and  thus  give 
the  real-estate  owners  the  same  rebate  as  the  owners  of  per- 
sonal property ;  secondly,  they  sought  to  equalize  the  assess- 
ment of  property,  and  thirdly,  they  endeavored  to  prevent 
the  escape  and  omission  of  immense  amounts  of  personal 
property  from  the  assessment  roll. 

During  the  next  few  years  the  states  of  Pennsylvania, 
New  Jersey  and  Connecticut  made  certain  alterations  in 
their  tax  laws  which  affected  New  York  State  by  tending 
to  lure  industries  and  capital  from  New  York  into  these 
other  states.  New  Jersey  exempted  all  mortgages  from 
taxation  in  certain  counties  and  cities  contiguous  to 
New  York.  Pennsylvania  practically  exempted  personal 
property  from  taxation  and  all  business  taxes  were  very 
low.  Maine  and  Vermont  exempted  manufacturing  estab- 
lishments from  taxation  for  a  period  of  years.  To  under- 
stand the  effect  of  these  liberal  laws  of  the  adjoining  states 
we  must  remember  that  the  general  property  tax  fell  upon 
everything  assessable,  namely,  buildings,  land,  capital  and 
machinery,  and  the  tax  was  not  infrequently  duplicated; 
the  land,  machinery  and  buildings  were  taxed  to  the  com- 
pany at  the  place  where  they  were  situated  and  the  stock  of 
the  company  was  taxed  to  the  stockholder  at  the  place  of 
his  residence.    Thus,  in  1868,  in  one  of  the  New  England 

*  Report  of  1862,  p.  17. 


126       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [450 

states,  the  aggregate  of  local  taxes  upon  a  corporation 
amounted  to  over  four  per  cent  upon  the  whole  capital  in- 
vested/ 

With  a  view  to  remedying  these  evils  another  tax  com- 
mission was  appointed  by  the  governor  in  1870  to  revise 
the  laws  for  the  assessment  and  collection  of  taxes.  It  con- 
sisted of  David  A.  Wells,  Edwin  Dodge  and  George  W. 
Cuyler,  and  made  its  report  in  1871.  The  two  chief  evils 
which  this  committee  found  were  the  inequalities  in  the 
assessment  of  real  estate  resulting  from  undervaluations 
and  the  escape  of  personal  property  from  taxation.  "  In 
some  instances  in  New  York  the  valuation  of  real  estate 
for  taxation  is  reported  as  low  as  20  per  cent  of  its  real 
value.  In  a  majority  of  cases  in  the  country  the  rate  varies 
from  25  per  cent  to  35  per  cent,  and  rises  in  the  cities  to  50 
per  cent  and  possibly  60  per  cent  of  the  maximum. 

"  In  short,  there  cannot  probably  be  found  a  single  in- 
stance in  the  whole  state  .  .  .  where  the  law  as  respects 
valuation  of  real  estate  is  fully  complied  with  and  where 
the  oaths  of  the  assessors  are  not  wholly  inconsistent  with 
the  exact  truth."  *  Since  the  state  tax  was  apportioned 
among  the  counties  on  the  basis  of  their  respective  valua- 
tions the  competition  between  the  assessors  of  the  counties 
for  the  lowest  possible  valuation,  necessarily  resulted  in  this 
low  and  unequal  valuation. 

Great  as  were  the  inequalities  due  to  under-assessment  of 
real  estate  the  situation  was  far  worse  in  regard  to  personal 
property.  In  Oneida  county  during  the  twenty-seven  years 
from  1842  to  1869  the  assessed  value  of  personal  property 
showed  a  decrease  of  $51,564,  while  the  capital  and  surplus 
of  the  national  banks  in  two  cities  of  the  county  exceeded 
the  whole  assessed  personal  property  of  the  county  by  over 

*  Reports  of  1871,  p.  26.  '  Ihid.,  p.  31- 


451  ]  REVENUES  12/ 

$6,000/  After  citing  other  similar  instances  the  committee 
concluded,  "  that  the  valuation  of  personal  property  for  pur- 
poses of  taxation  generally,  and  in  New  York  especially, 
is  a  mere  semblance  and  a  libel  upon  the  intelligence  and 
honesty  of  both  those  who  enact  and  those  who  administer 
the  laws."  ' 

The  actual  assessed  value  of  personal  property  in  1870 
was  $434,000,000,  whereas  the  commission  found  from  a 
computation  of  capital  stock  and  securities  held  by  banks, 
railroads  and  insurance  companies  that  the  sum  was  not 
far  from  $1,665,000,000.  In  a  debate  in  the  legislature  it 
was  stated  that  there  were  thirty  men  in  the  state  whose 
aggregate  wealth  would  exceed  the  total  assessed  valuation 
of  property. 

Two  remedies  for  the  evils  were  suggested  by  the  com- 
mission, either  to  amend  and  strengthen  the  existing  sys- 
tem, or  to  construct  a  new  system.  Under  the  first  plan 
the  commission  made  the  following  recommendations:  "(i) 
That  a  central  authority  be  created,  consisting  either  of  a 
single  commissioner  or  a  board  of  commissioners  of  taxes. 
(2)  That  the  listing  system  should  not  be  used.  (3)  That 
intangible  property  should  be  exempted  from  taxation. 
(4)  That  debts  should  be  exempted  in  full.  (5)  That  mort- 
gages should  be  free  from  taxation.  (6)  That  savings 
banks  should  be  exempted.  (7)  That  corporations  should 
not  be  taxed  as  long  as  it  was  possible  to  do  without  their 
aid,  since  such  a  tax  would  raise  the  cost  of  production." 

For  the  adoption  of  a  new  system  of  taxation  the  fol- 
lowing recommendations  were  made :  "  ( i )  That  all  corpor- 
ations, monopolistic  in  nature,  should  be  taxed.  (2)  That 
a  central  body  should  be  constituted  in  order  to  supervise 
administration.      (3)   That  railroads  should  be  separated 

1  Ibid.,  p.  37.  « Ibid.,  p.  38. 


128       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [452 

from  the  minor  divisions  and  be  assessed  only  by  the  state. 
(4)  In  order  to  reach  personal  property  two  plans  were  sub- 
mitted: (a)  tax  the  houses  and  buildings  as  real  estate 
separately,  assuming  that  they  were  worth  one-half  of  the 
total  value  of  the  land  plus  building,  and  then  tax  the  houses 
and  buildings  on  a  valuation  of  50  per  cent  of  this  addi- 
tional, as  a  representative  of  its  valuation  of  personal  prop- 
erty; {h)  tax  buildings  conjointly  with  land  as  real  estate 
and  then  tax  the  occupier  on  a  valuation  of  three  times  the 
rental  value  of  the  premises.  (5)  A  limit  should  be  placed 
upon  the  rate  at  which  taxes  might  be  levied  in  one  year. 
(6)  Persons  were  granted  the  privilege  of  complaining 
against  unjust  assessment  to  the  tax  commissioner."  ^ 

The  commission  submitted  the  report  with  the  desire  that 
no  action  be  taken  immediately  so  that  the  people  might 
consider  the  effect  of  such  a  change  in  the  tax  system.  The 
following  year  a  second  report  was  submitted,  covering 
much  the  same  ground  and  to  it  was  attached  a  code  of  laws 
for  the  valuation  and  assessment  of  real  and  personal  prop- 
erty. The  important  recommendations  of  this  report  were 
the  following:  (i)  That  the  occupier  of  buildings  should 
be  taxed  on  a  valuation  of  three  times  the  rental  value.  (2) 
That  county  boards  of  supervisors  should  be  prohibited 
from  levying  a  tax,  without  special  authority  from  the  legis- 
lature, on  any  town  in  excess  of  one  per  cent,  or  in  any 
ward  or  city  in  excess  of  two  per  cent  of  the  total  valuation 
on  the  assessment  roll.  (3)  That  as  few  things  as  possible 
should  be  taxed.  We  quote  from  the  report  as  follows, 
without,  however,  vouching  for  the  validity  of  the  principle : 

"  The  one  principle  in  taxation  which  the  civilized  world 
after  years  of  experimenting  has  gradually  come  to  accept 
as  fundamental,  is  to  tax  but  a  few  things,  and  then  to  leave 

*  Chapman,  State  Tax  Commissions,  pp.  39-40- 


453]  REVENUES  129 

those  taxes  to  diffuse,  adjust  and  apportion  themselves  by 
the  inflexible  laws  of  trade  and  political  economy."  ^ 

The  able  report  of  this  commission  resulted  in  no  legis- 
lative action.  The  only  practical  result  was  an  increase  in 
assessed  Vcduation  for  a  few  years.  In  1875  the  state  as- 
sessors pointed  to  the  net  increase  of  $198,000,000,  in  that 
year  over  the  previous  year,  as  an  evidence  of  progress  in 
the  right  direction.  One  objection  to  the  full  assessment 
was  that  it  would  lead  to  extravagance.  In  1876,  however, 
the  assessors  report  an  increased  assessment  of  real  estate 
of  $625,000,000,  but  the  personal  property  assessment  de- 
creased $39,000,000.  It  is  interesting  to  note  in  the  light 
of  future  events  that  in  1876  the  assessors  in  the  city  of 
Buffalo  set  the  example  of  assessing  each  lot  in  the  city 
separately  from  the  house  or  building  upon  it.^ 

A  commission  of  three  members  was  appointed  in  1880 
to  devise  revenues  for  the  state  government  by  a  special  tax 
on  corporations  and  particular  classes  of  business,  and 
thereby  to  limit  the  general  taxes  to  be  imposed  in  the  local 
communities  exclusively  for  the  support  of  local  govern- 
ment The  following  bills  were  presented :  ( i )  To  exempt 
vessels  registered  in  New  York  owned  by  American  citizens 
or  corporations  from  taxations;  (2)  To  tax  moneyed  capi- 
tal (foreign)  engaged  in  the  business  of  banking,  receiving 
deposits  or  otherwise;  (3)  To  provide  for  the  assessment 
and  collection  of  taxes  on  trust  companies  and  other  com- 
panies of  a  like  nature  doing  a  similar  business ;  (4)  To  pro- 
vide revenues  for  the  state  by  a  tax  on  collateral  inheritance, 
and  on  corporate  trust  mortgaged  securities;  (5)  To  pro- 
vide revenue  for  the  state  by  a  special  tax  on  certain  sales 
called  the  "  Broker's  Bill  " ;  (6)  To  tax  savings  banks  and 

*  Report  of  1872,  p.  47. 

'  Annual  Report  of  Assessors,  1877,  P-  28. 


130       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [454 

savings  institutions;  (7)  To  tax  life-insurance  companies. 
They  recommended  that  the  laws  be  codified  and  be  made 
more  explicit,  so  as  to  reach  the  escaping  property  and  that 
the  exemption  of  indebtedness  should  be  abolished  or  made 
equal  and  uniform  as  to  every  other  kind  of  property. 

Many  of  these  recommendations  were  embodied  in  laws 
passed  during  the  next  few  decades. 

Conclusion 

The  general  property  tax  worked  fairly  well  as  long  as 
the  taxes  were  small  in  amount  and  as  long  as  the  greater 
portion  of  wealth  consisted  in  land  and  buildings.  When 
the  burdens  became  heavy,  however,  and  intangible  prop- 
erty had  accumulated  in  large  proportions  it  could  no  longer 
be  maintained  with  any  degree  of  justice.  Many  difficulties 
were  inherent  in  the  system,  such  as  under-valuation,  which 
resulted  in  unequal  assessment,  the  impossiblity  of  assessing 
invisible  or  intangible  personal  property,  and  the  imprac- 
ticability of  applying  the  system  to  large  industrial  corpora- 
tions whose  business  extended  throughout  the  state  and 
neighboring  states.  Aside  from  these  defects  inherent  in 
the  system,  the  chief  cause  for  the  breakdown  of  the  general 
property  tax  was  found  in  the  rapidly-increasing  expendi- 
tures for  local  purposes. 

An  investigation  in  1845  showed  that  of  the  738  towns 
in  the  state,  695  were  entirely  free  from  debt  and  43  towns 
had  contracted  debts  to  the  amount  of  $37,263,  which  debts 
were  usually  for  bridges  and  of  a  temporary  character. 
Commenting  upon  these  facts,  the  comptroller  said,  "  It  is 
most  gratifying  to  perceive  that  nearly  all  the  towns  of  the 
state  adopt  the  salutary  and  saving  policy  '  to  pay  as  they 
go  \  In  this  particular  the  golden  rule  established  by  the 
towns  is  not  only  worthy  of  the  approval  of  every  friend 
of  economy,  and  a  sound  system  of  finance,  but  of  imitation 


455]  REVENUES  131 

by  the  common  councils  of  cities  and  by  the  state  govern- 
ment." ^  The  aggregate  debt  of  the  65  cities  and  villages 
reporting  amounted  to  $15,137,204. 

This  condition  did  not  continue  long,  and  during  the 
latter  sixties  the  towns  and  counties  increased  their  debts 
and  tax  burdens  to  pay  bounties,  to  construct  bridges  and 
roads  and  to  subscribe  to  railroads.  The  total  amount  of 
local  indebtedness  in  1867  amounted  to  $89,081,036,  which 
was  nearly  twice  the  amount  of  the  state  debt. 

In  1880,  the  total  indebtedness  less  sinking-fund  assets 
of  the  cities,  towns,  villages  and  boroughs  of  the  state 
amounted  to  $179,449,592.^  The  total  debt  of  the  state 
for  the  same  year  was  only  a  little  over  eight  million  dollars, 
so  that  in  the  thirteen  years,  1867  to  1880,  the  local  indebt- 
edness had  doubled  and  had  increased  from  twice  to  more 
than  twenty  times  the  state  debt. 

Between  the  years  1827  and  1887  the  local  taxes  increased 
fourteen  times  while  the  state  revenues  increased  but  seven 
times.  In  most  of  the  older  and  more  highly-developed  parts 
of  the  country  the  same  relative  increase  in  local  expendi- 
tures is  noted.  One  of  the  chief  reasons  for  the  movement 
toward  the  separation  of  the  sources  of  revenue  for  state 
and  local  purposes  was  the  desire  to  limit  the  interference 
of  the  legislature  in  local  affairs  and  to  enlarge  the  province 
and  increase  the  independence  of  the  local  subdivisions. 

The  inherent  weakness  of  the  system  has  already  been 
described.  It  simply  failed  to  work.  All  attempts  to  perfect 
it,  by  making  the  laws  more  strict  and  by  insisting  upon 
a  more  rigid  enforcement  of  the  law,  failed  to  achieve  the 
desired  result.  Each  year  showed  a  decrease  in  the  as- 
sessed valuation  of  personal  property,  and  yet  it  was  appar- 

*  Annual  Report,  Comptroller,  1845,  p.  51. 

'  U.  S.  Census,  Wealth,  Debt  and  Taxation,  1902,  p.  502. 


132       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [436 

ent  on  all  sides  that  personal  property  was  being  accumu- 
lated as  never  before  in  the  history  of  the  world.  "  In 
1869  the  real  estate  contributed  78  per  cent  of  the  public 
revenue,  and  personal  property  paid  22  per  cent;  while  in 
1879,  real  estate  paid  88  per  cent  and  personal  property  12 
per  cent  of  the  whole  tax.^  In  1880  the  aggregate  valuation 
of  real  and  personal  property  was  given  at  $2,637,000,000, 
whereas  the  estimated  aggregate  of  personal  property  alone 
owned  in  the  state,  and  liable  to  taxation,  was  $2,085,000,- 
000.^  The  fact  was  that  profits  now  constituted  a  larger 
source  of  income  than  rent,  and  yet  they  escaped  taxation 
altogether.  The  economic  situation  demanded  a  change, 
and  a  new  system  adapted  to  these  changed  conditions  de- 
veloped after  the  year  1880. 

*  Taxation  of  American  Cities,  p.  176. 
>  Ibid.,  p.  181. 


CHAPTER  VIII 
Revenues  (concluded) 

REVENUES  OF  EARLY  PERIOD 

Auction  Duties 

The  auction  duties  resulted  from  a  tax  imposed  upon  the 
sale  by  auction  of  wines  and  spirits,  whether  domestic  or 
foreign,  and  all  goods,  merchandise  and  effects  of  foreign 
production  imported  into  the  state. 

This  system  of  collecting  duties  on  goods  sold  at  auction 
was  in  operation  as  early  as  1784,  when  a  duty  of  two  and 
one-half  per  cent  was  levied.  In  1801  an  additional  duty 
of  $1.00  per  one  hundred  dollars  was  imposed  upon  goods 
sold  in  New  York  City,  and  this  additional  amount  raised 
went  to  the  support  of  the  foreign  poor  in  the  city.  Auc- 
tioneers were  required  to  take  out  a  license,  to  give  a  bond, 
and  their  charges  were  limited  to  two  and  one-half  per 
cent  of  their  sales. 

In  18 1 7,  the  system  was  changed  and  the  auctioneers  in- 
stead of  being  licensed  were  now  appointed  by  the  governor 
and  the  Senate.  The  rates  were  also  reduced  to  one  and 
one-half  per  cent  on  the  majority  of  goods.  This  continued 
down  to  1838,  when  the  privilege  was  again  extended  to 
every  person  giving  the  requisite  bond  and  depositing  it 
with  the  comptroller. 

From  181 7  to  1835,  the  receipts  from  this  source  were 

diverted  to  the  canal  fund,  and  during  this  period  $3,592,- 

039  were  collected  and  so  diverted.    During  the  early  years 

this  source  furnished  from  one-fifth  to  one-sixth  of  the  total 

457]  133 


134       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [458 

revenue  of  the  state.  In  18 10  it  amounted  to  over  $100,- 
o»oo,  and  by  1825  it  amounted  to  over  $200,000. 

In  1846,  the  rates  were  much  reduced,  and  a  few  years 
later  much  complaint  was  made  of  a  falling-off  in  the  reve- 
nue owing  to  the  fact  that  true  returns  were  not  made  or 
that  persons  not  authorized  to  sell  goods  exercised  the 
privilege  without  paying  the  tax  to  the  state. 

The  revenue  from  this  source  showed  a  marked  decrease 
beginning  with  the  year  1868,  when  it  amounted  to  $191,- 
619,  and  by  1879  it  amounted  to  only  $38,408.  The  de- 
crease continued  until  in  1893  ^^^Y  $394  was  received  from 
this  source.  The  decrease  was  due  to  the  evasion  of  the  law 
on  the  part  of  licensed  auctioneers,  both  by  withholding  the 
duties  collected  and  by  selling  privately  goods  subject  to 
auction  duties. 

Steamboat  Tax 

From  18 1 7  to  1823,  a  tax  was  imposed  upon  steamboat 
passengers,  traveling  on  steamers  plying  upon  state  waters. 
In  1 82 1,  the  tax  was  assumed  by  the  steamboat  companies 
and  was  commuted  in  a  fixed  payment  of  $5,000  a  year. 
The  tax  was  discontinued  after  1823.  The  total  amount 
raised  was  $73,510,  all  of  which  went  into  the  canal  fund. 

Peddler's  License  Tax 

The  peddler's  license  tax  was  imposed  upon  itinerate 
hucksters  and  peddlers,  the  tax  varying  in  amount,  depend- 
ing upon  whether  the  traveling  was  on  foot,  with  a  one- 
horse  wagon,  or  a  team  and  wagon.  As  a  source  of  revenue 
it  was  insignificant  and  never  exceeded  $3,500  in  any  year. 
It  yielded  $60  in  1910. 

Lotteries 
If  the  statesmen  of  the  early  period  of  the  state's  history 


459]  REVENUES  135 

were  slow  to  raise  revenue  by  imposing  a  direct  tax  upon 
the  people,  they  found  another  means  which  was  quite  as 
effective  and  better  suited  to  the  temper  of  the  times.  The 
method  of  raising  money  by  lotteries  became  immensely 
popular  and  was  largely  used  during  the  first  quarter  of  the 
century.  The  reason  for  this  lottery  craze,  which  was  by 
no  means  confined  to  New  York  State,  has  been  well  sum- 
marized by  McMaster,  who  says,  "  The  funding  act  of 
1790  was  highly  popular  in  the  Northern  and  Eastern  states, 
because  here  the  greater  part  of  the  army  had  been  main- 
tained and  here  tens  of  thousands  of  farmers,  tradesmen 
and  merchants  had  come  into  possession  of  certificates  in 
final  settlements.  In  a  moment  they  found  themselves  in 
possession  of  valuable  Government  script.  A  rage  for  spec- 
ulation sprung  up  of  which  one  phase  of  this  mania  for 
speculation  was  the  lottery  craze.  Money  grew  easier  and 
plentiful,  even  the  poorest  laborer  in  the  ditches  was  en- 
abled to  gratify  his  taste  for  speculation  by  venturing  a  few 
shillings  in  a  part  ticket  in  one  of  the  hundred  lotteries  for 
schools,  bridges,  roads,  churches,  etc."  As  early  as  1783 
private  lotteries  were  declared  a  nuisance  in  New  York  and 
ordered  to  be  suppressed;  in  1790  and  1795  local  bills  were 
passed  allowing  New  York  City  to  raise  sums  by  lottery  for 
erecting  a  hall  for  the  use  of  the  U.  S.  Congress  and  for 
a  building  for  the  poor.  Two  years  later  the  state  de- 
finitely entered  upon  the  policy  of  authorizing  lotteries  to 
be  drawn  for  state  purposes;  numerous  acts  were  passed 
under  the  high-sounding  titles  of  "  an  act  for  opening  and 
improving  roads,"  "  an  act  for  the  encouragement  of 
schools,"  "  an  act  for  the  promotion  of  literature,"  etc. 
These  state  lotteries  were  in  the  hands  of  managers  ap- 
pointed by  the  legislature  who  conducted  the  lotteries,  col- 
lected the  funds,  paid  the  prizes  and  turned  the  receipts 
over  either  to  the  institution  for  which  the  lottery  was 


136       FINANCIAL  HISTORY  OF  NEW  YOkK  STATE      [460 

drawn  or  to  the  treasurer.  These  managers  received  14 
per  cent  of  the  returns  as  compensation  and  for  defraying 
all  necessary  expenses.  The  treasurer's  reports  of  the 
period  fail  to  reveal  the  large  sums  collected  in  this  way 
since  a  large  percentage  of  the  receipts  from  lotteries  did 
not  pass  through  the  treasurer's  hands  at  all.  It  would  be 
exceedingly  difficult  to  state  all  the  acts  of  the  legislature  re- 
garding lotteries  and  the  sums  raised,  since  one  lottery  was 
often  suspended  to  make  room  for  another  and  the  money 
originally  appropriated  was  raised  by  a  subsequent  lottery. 
In  1819  an  assembly  committee  was  appointed  to  report 
upon  the  sums  raised  by  lotteries.  The  following  table  is 
taken  from  this  report :  ^ 

Sums  actually  raised  by  1819  Sums  to  be  raised 

Purpose  Amount  Purpose  Amount 

Roads    $109,100  Union  College   $284,000 

Hudson  iR.   Improvement.  108,000  Historical  Society 12,000 

Literature    62,641  iReimburse  S.  Treas 100,000 

Union  College 111,338  All  others   165,791 

Common  schools  37,5oo  

Botanical  Garden   74,268  Total   $561,791 

Board  of  Health 25,000 

t^harity   20,000 

Sag  Harbor    5,ooo 

Capitol  building    32,000 


Grand   total    $584847 

The  losses  sustained  by  the  state  through  fraud  or  incom- 
petent management  of  lotteries  amounted  to  $68,664,  so 
that  the  net  result  to  the  state  in  18 19  was  $516,183,  and 
there  was  yet  to  be  raised  $561,791. 

Since  adjoining  states  also  authorized  lotteries  it  became 
necessary  to  forbid  the  sale  of  outside  lottery  tickets  within 
the  territory  of  the  state.     It  was  almost  impossible  to  en- 

*  Assembly  Journal,  1819,  p.  906. 


46l]  REVENUES  137 

force  such  a  law  and  furthermore  it  was  doubtful  whether 
the  state  had  a  right  to  enforce  such  a  law.  A  test  case 
arose  on  this  point  between  the  District  of  Columbia  and 
the  state  of  Virginia.  Congress  had  in  the  act  of  incor- 
porating the  city  of  Washington  authorized  the  raising  of 
money  by  lotteries  to  effect  important  improvements.  A 
lottery  was  accordingly  created  and  the  Cohens  who  were 
the  managers  were  indicted  for  selling  tickets  in  Virginia 
under  a  law  of  Virginia  which  prohibited  all  persons  from 
buying  or  selling  outside  lottery  tickets.  The  state  courts 
decided  against  the  Cohens  and  the  case  was  taken  up  to  the 
Supreme  Court  where  the  state  court  decision  was  affirmed. 
Since  then  lottery  tickets  of  the  District  of  Columbia  au- 
thorized under  Federal  laws  could  not  be  sold  in  other 
states  contrary  to  existing  laws,  it  was  clear  that  states 
could  not  authorize  the  sale  of  their  tickets  in  other  states. 
In  addition  to  this  lack  of  enforcement  of  lottery  laws  other 
evils  connected  with  this  system  of  legalized  gam- 
bling soon  became  apparent.  Among  these  evils  were :  ( i ) 
That  lotteries  were  gaming  of  the  worst  sort,  a  theory 
based  upon  the  consideration  that  ninety  adventurers 
in  a  hundred  must  lose  in  order  that  ten  might  gain;  (2) 
That  tickets  were  manufactured  in  fictitious  lotteries 
and  sold,  that  halves  and  quarters  of  tickets,  represent- 
ing the  same  number,  were  multiplied  indefinitely  both  in 
real  and  in  fictitious  lotteries,  thus  imposing  upon  ignorant 
and  deluded  purchasers;  (3)  That  they  were  seductive  and 
infatuating;  and  finally  (4)  that  fraud  and  trickery  often 
occurred  in  drawings  which  were  presided  over  by  the  state 
officers.  This  agitation  resulted  in  the  insertion  of  an 
article  in  the  Constitution  of  182 1  (Art.  7,  Sec.  11),  pro- 
viding that  no  lottery  should  hereafter  be  authorized  in  the 
state,  and  in  1822  an  act  was  passed  limiting  the  continu- 
ance of  lotteries  and  requiring  that  they  be  turned  over  to 


138       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      l^e2 

the  management  of  the  institutions  for  which  they  were 
appropriated.  The  trustees  of  Union  College,  who  were  to 
be  the  largest  beneficiaries,  now  bought  up  most  of  the  lot- 
tery grants  made  to  other  institutions,  but  in  1823  they 
sold  their  interest  in  them  to  Messrs.  Yates  and  Mclntyre 
for  $276,9^)1.  These  gentlemen  now  bought  up  all  the 
remaining  lottery  grants  and  eventually  became  proprietors 
of  all  the  lottery  grants  authorized  to  be  drawn  in  the  state. 
Public  opinion  now  thoroughly  aroused  became  impatient 
of  delay,  and  in  1829  a  legislative  committee  on  the  subject 
of  lotteries  recommended  the  repeal  of  all  laws  authorizing 
lotteries  and  the  payment  of  all  outstanding  grants  out  of 
the  treasury.  This  was  not  done,  but  a  compromise  was 
accepted  whereby  Yates  and  Mclntyre  agreed  to  relinquish 
all  rights  that  they  had  purchased  if  they  should  be  allowed 
to  continue  the  drawing  unmolested  until  1835.  Finally,  in 
1833,  these  gentlemen  signed  an  agreement  relinquishing 
all  right  to  draw  lotteries,  and  thus  was  terminated  New 
York's  experience  with  lotteries  as  a  fiscal  measure. 

Proceeds  from  Salt  Works 

The  Onondaga  Salt  Springs  were  ceded  to  the  state  in 
1795  by  the  Indians  for  $1,000  and  annual  royalties  of 
$100  and  150  bushels  of  salt.  In  1797  a  superintendent  was 
appointed,  and  the  tract  was  divided  into  ten-acre  lots  and 
leased  to  individuals,  requiring  each  lessee  to  manufacture 
ten  bushels  per  year  and  four  cents  per  bushel  was  charged. 
In  1803  the  duty  was  fixed  at  three  cents,  but  was  raised  to 
twelve  and  one-half  cents  in  181 7.  At  this  time  New  York 
salt  was  selling  for  $2.00  a  bushel,  whereas  salt  from  the 
springs  in  other  states  sold  for  $4.00  to  $7.00.  It  was  con- 
fidently expected  and  predicted  that  the  New  York  works 
would  supply  the  valley  of  Ohio  and  Mississippi  with  salt 
and  that  an  increasing  revenue  would  be  derived.     From 


463]  REVENUES  139 

18 1 7  to  1836  the  proceeds  were  diverted  to  the  canal  fund, 
during  which  time  $2,055,458  was  collected. 

The  constitution  of  182 1  provided  that  the  duty  of 
twelve  and  one-half  cents  per  bushel  should  not  be  reduced 
until  the  canal  debt  was  paid.  This  attempt  to  control  eco- 
nomic forces  by  laws  could  not  but  fail.  In  consequence, 
however,  of  a  reduction  of  one-half  of  the  duty  on  foreign 
salt  by  Congress,  the  state  had  to  amend  the  constitution, 
this  time  fixing  the  minimum  rate  on  salt  at  six  cents  per 
bushel.  A  law  of  the  following  year  fixed  the  duty  at  this 
minimum  rate.^ 

In  1825,  owing  to  a  dispute  among  the  manufacturers 
concerning  the  priority  of  their  rights  to  the  water  supply, 
the  state  took  over  all  the  machinery,  wells  and  pumps,  and 
distributed  the  supply  among  the  manufacturers.  In  1840, 
the  canal  board  authorized  a  drawback  of  three  cents  per 
bushel  on  salt  shipped  outside  of  the  state.  The  board  later 
rescinded  their  act  as  being  in  conflict  with  the  constitution, 
but  the  legislature  overcame  the  difficulty  by  passing  a  law  ^ 
authorizing  direct  payments  of  bounties  from  the  general 
fund  as  an  equivalent  for  the  drawbacks  previously  granted. 
The  effect  of  this  law  was  to  cause  a  marked  increase  in 
the  amount  of  salt  manufactured,  as  shown  by  the  follow- 
ing table : 


Year 

Amount  Delivered 

Bounty  Paid 

1843 

844,285  bushels 

$46,479 

1844 

2,071,882  bushels 

91,639 

1845 

2,671,434  bushels 

99,380 

1846 

909,981  bushels 

16,837 

The  operation  of  the  bounty  met  with  much  opposition. 
It  produced  a  situation  whereby  an  inhabitant  of  Massa- 

'  Law  1834,  chap.  10.  '  Law  of  1843,  229. 


I40       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [464 

chusetts  could  get  Onondaga  salt  cheaper  than  an  inhabitant 
of  the  state,  while  the  inhabitant  of  the  state  had  to  pay 
annually  his  proportion  of  the  bounty  which  went  to  a  few 
manufacturers/  It  was  agreed  that  it  was  "  more  just  and 
equal  to  support  the  government  by  general  assessment  on 
property  than  by  a  tax  on  salt,  which  was  an  article  of  nec- 
essary consumption  to  every  family  in  the  state,"  ^  and  so 
the  bounty  law  was  repealed,  and  the  duty  on  salt  reduced 
to  one  cent  per  bushel.  The  receipts  given  in  the  comp- 
trollers' reports  represent  gross  receipts  and  not  net  receipts. 
One  cent  per  bushel  is  charged  on  each  bushel  of  salt  in- 
spected and  in  addition  a  small  amount  is  received  from 
rents,  penalties  and  sales. 

The  fond  hopes  of  the  early  promoters  of  this  industry 
were  doomed  to  disappointment.  As  a  means  of  enriching 
the  state,  the  salt  works  never  contributed  more  than  a  few 
thousand  dollars  annual  net  revenue.  The  maximum  net 
revenue  paid  was  in  1862,  when  it  amounted  to  $49,696.* 
The  total  net  revenue  from  1795  to  1886  amounted  to  $4,- 
375,664,  so  that  it  is  safe  to  say  that  the  total  net  revenue 
derived  from  the  salt  works  from  the  beginning  in  1797  to 
the  present  time  is  probably  less  than  $5,000,000. 

Income  from  State  Funds 

During  the  first  three  decades  of  the  state's  history  the 
income  from  state  funds  amounted  to  from  one-third  to 
one-half  of  the  total  receipts.  The  state's  funds  which 
consisted  largely  of  the  funded  debt  of  the  United  States 
and  the  proceeds  of  the  sale  of  the  public  lands,  were  in- 
vested in  bank  stock,  in  canal  companies,  and  loaned  to 
counties  and  individuals.    In  18 10  the  amount  thus  invested 

^  A.  R.  Comp.,  1846,  p.  40.  *Ibid.,  1845,  p.  42. 

•  Ely,  Taxation  in  American  States  and  Cities. 


465]  REVENUES  141 

was  $4,191,803,  and  the  annual  revenue  amounted  to  $283,- 
000,  of  which  $33,000  was  received  as  dividends  on  bank 
stock  owned  by  the  state.  By  1835  the  state  had  disposed 
of  most  of  its  funds  and  consumed  the  proceeds  in  paying 
current  expenses,  and  since  that  time  the  income  has  been 
simply  the  interest  on  balances  on  deposit  at  the  state  de- 
positories. In  191 2  the  interest  on  deposits  amounted  to 
$321,481. 

Proceeds  from  Public  Lands 

During  the  years  1 790-1 795  the  proceeds  from  the  sale 
of  public  lands  amounted  to  50  per  cent  of  the  entire  state 
revenue.  The  greatest  amount  received  in  any  single  year 
was  in  1792,  when  $325,000  was  received  out  of  a  total 
revenue  of  $595,500.  It  was  thought  that  a  fund  would 
accumulate  from  this  source  which  would  relieve  the  people 
of  the  burdens  of  taxation  for  the  support  of  the  govern- 
ment. No  such  fund,  however,  was  allowed  to  accumulate. 
With  the  changed  policy  of  the  state  regarding  her  public 
lands,  instead  of  being  a  source  of  revenue,  they  have  be- 
come a  source  of  expenditure.  The  taxes  alone  paid  by  the 
state  on  its  lands  amounted  to  $158,663  in  191 1.  Thus  it  is 
clear  that  the  amount  included  under  this  heading  is  a  nomi- 
nal receipt  only  and  does  not  represent  a  net  revenue  to  the 
state  from  her  public  lands. 

Fees  and  Fines  of  Public  OMcers 

The  receipts  from  these  sources  were  very  small,  rarely 
exceeding  a  few  thousand  dollars  for  a  hundred  years.  In 
the  last  two  decades,  however,  there  was  such  a  remarkable 
increase  that  by  19 12  over  one  million  dollars  was  derived 
from  these  sources.  The  office  of  the  Secretary  of  State  is 
the  largest  contributor.  Next  in  order  come  the  receipts  of 
the    Conservation    Department,    yielding    $282,212.      The 


142       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [466 

license  fees  under  the  Department  of  Agriculture  amounted 
to  $33,420,  while  in  addition  there  were  collected  as  fines 
under  agricultural  laws  $39,649.  Fees  from  notaries 
throughout  the  various  counties  yielded  $76,106. 

Proceeds  from  State  Institutions 

The  receipts  from  this  source  were  practically  a  negligible 
quantity,  rarely  exceeding  $1,000  a  year  down  to  the  year 
1854,  when  the  prison  receipts  were  incorporated  in  the 
annual  receipts  of  the  state.  Up  to  this  time  the  annual 
reports  from  the  state  prisons  were  submitted  to  the  comp- 
troller and  attached  to  his  report  in  the  form  of  appendices. 
The  receipts  as  given  in  the  reports  did  not  represent  the 
net  receipts  over  and  above  all  expenses  of  maintenance, 
but  were  simply  the  gross  receipts  from  the  sale  of  manu- 
factured goods  and  other  sources  of  revenue.  During  the 
decade  1870  to  1879  the  average  yearly  excess  of  payments 
from  the  treasury  over  receipts  from  the  state  prisons  was 
about  $450,000.  The  prison  law  now  provides  for  a  prison 
capital  fund  which  consists  of  the  proceeds  of  the  labor  of 
the  prisoners  and  the  sale  of  manufactured  articles,  and  a 
convict  deposit  and  miscellaneous  earnings'  fund.  When- 
ever, in  the  opinion  of  the  comptroller,  the  fund  exceeds 
the  amount  necessary  for  the  proper  operation  of  the  prison 
industries,  he  may  withdraw  moneys  and  transfer  them  to 
the  general  fund. 

The  receipts  from  the  various  state  charitable  institu- 
tions and  insane  asylums  vary  in  amounts  from  a  few  dol- 
lars to  several  thousand  dollars  a  year  for  each  institution 
and  swell  the  total  to  several  hundred  thousand  dollars. 
The  receipts  from  the  institutions  for  the  insane,  under  the 
supervision  of  the  Commission  in  Lunacy,  amounted  to 
$575,603  in  19 1 2.  The  New  York  State  Hospital  for 
Tuberculosis  contributed  $65,000,  and  the  New  York  State 


467]  REVENUES  143 

Reformatory  $46,000.    The  total  receipts  from  the  various 
state  institutions  amounted  to  $860,807  ^^  19 12. 

Fees 

(a)  Bank  Department. — The  general  banking  act  of  1838 
provided  that,  for  paying  the  expenses  incurred  by  the 
comptroller  by  virtue  of  that  act,  he  should  charge  against 
the  bank  applying  for  circulating  notes  such  rate  percent 
thereon  as  might  be  sufficient  for  that  purpose  and  as 
might  be  just  and  reasonable.  When  the  bank  department 
was  organized,  all  expenses  incurred  in  conducting  the  busi- 
ness of  the  department  were  to  be  paid  by  the  incorporated 
banks  on  whose  behalf  the  expenses  were  incurred.  The 
special  services  performed  for  any  particular  bank,  such  as 
that  of  incorporation,  examinations,  issuance  of  new  bills 
or  destruction  of  old  bills,  were  charged  to  the  particular 
bank  for  which  they  were  performed,  and  all  other  expenses 
were  charged  to  all  the  incorporated  banks  "  in  such  propor- 
tions as  the  superintendent  should  deem  just  and  reason- 
able." The  superintendent  was  appointed  by  the  governor 
for  three  years  at  a  salary  of  $5,000,  and  he  was  required 
to  execute  a  bond  to  the  amount  of  $50,000.  A  salary  of 
$1,000  was  paid  by  the  bank  department  to  the  treasurer 
for  his  services  in  countersigning  notes  issued  by  the  super- 
intendent. The  superintendent  now  receives  a  salary  of 
$7,000,  and  three  deputy  superintendents  are  now  necessary 
to  carry  on  the  work.  The  total  expenditures  of  this  de- 
partment for  191 2  were  $195,317,  of  which  the  expenses 
of  bank  examiners  contributed  the  largest  item.  The 
amount  contributed  by  the  banks  during  the  year  191 2 
amounted  to  $252,307. 

(b)  Insurance  Department. — This  department  was  estab- 
lished in  1859.  The  superintendent  is  appointed  by  the 
governor  for  three  years  at  a  salary  of  $10,000,  and  he  is 


144       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [468 

also  required  to  furnish  a  bond.  The  expenses  of  examin- 
ing insurance  companies  are  first  paid  out  of  the  treasury, 
and  this  sum  is  later  reimbursed  by  the  institutions  ex- 
amined on  presentation  of  the  bill,  certified  by  the  superin- 
tendent or  comptroller.  The  following  fees  are  payable  by 
the  insurance  companies.  For  filing  declarations  or  for  cer- 
tified copy  of  the  charter,  $30;  for  filing  annual  statement, 
$20;  for  each  certificate  of  authority  a  sum  not  exceeding 
$5;  for  every  copy  of  paper  filed  in  the  superintendent's 
office,  ten  cents  per  folio,  and  for  affixing  the  seal  of  said 
office,  $1.00.  In  case  these  fees  do  not  cover  the  expense 
of  the  department,  the  superintendent  is  authorized  to 
assess  pro  rata  upon  all  the  insurance  companies  of  the 
state  the  excess  of  such  expenses,  and  he  is  empowered  to 
collect  these  assessments.  No  transfer  of  stocks,  bonds  or 
mortgages  is  valid  unless  countersigned  by  the  treasurer, 
and  for  this  service  he  is  to  be  paid  annually  $250  from  the 
insurance  department.  Foreign  fire-insurance  companies 
are  subject  to  taxation  on  their  gross  premiums  at  the  rate 
of  $2.00  per  $100,  and  this  is  to  be  paid  to  the  treasurer  of 
the  fire  department  in  the  cities  where  they  are  located. 
The  total  fees  collected  in  191 2  amounted  to  $689,269. 

(c)  Railroad  Tax. — The  salaries  and  expenses  of  the 
State  Railroad  Commissioners  were  to  be  paid  by  the  sev- 
eral railroad  companies  of  the  state  in  proportion  to  their 
gross  receipts.  The  comptroller  was  to  notify  each  com- 
pany of  the  amount  due  December  ist,  and  the  sum  must 
be  paid  before  December  31st.  The  Board  of  Commission- 
ers was  abolished  in  1857,  but  the  same  assessments  con- 
tinued to  be  made  as  before.  The  tax  was  used  to  cover  the 
expenses  of  the  R.  R.  Commission  established  in  1883. 
In  1907,  the  R.  R.  Commission  was  abolished  and  the  work 
of  the  commission  was  transferred  to  the  Public  Service 
Commission. 


469]  REVENUES  145 

Subventions  from  United  States  Government 

Beginning  in  1890  and  continuing  down  to  19 12,  the 
United  States  made  annual  contributions  to  the  Soldiers' 
and  Sailors'  Home  and  Women's  Relief  Corps  Home.  The 
amounts  varied  from  $72,000  in  1890  to  $208,000  in  1906. 
The  amount  contributed  in  1912  was  $179,120. 

United  States  War  Claims 

From  time  to  time,  as  the  accounts  between  the  state 
and  the  United  States  were  adjusted,  the  United  States  gov- 
ernment paid  over  sums  to  the  state.  The  United  States 
direct  tax  levied  in  1861  amounted  to  $2,213,331,  and  this 
was  refunded  to  the  state  in  1891.  In  1910  the  United 
States  reimbursed  the  state  of  New  York  to  the  amount  of 
$49,542  for  ordnance  furnished  troops  for  use  in  the  war 
with  Spain. 

The  New  Tax  System 

The  decade  following  the  year  1880  witnessed  a  marked 
change  in  the  methods  of  taxation  in  this  state.  The  re- 
forms brought  about  were  almost  revolutionary  in  char- 
acter. Down  to  1880,  the  general  property  tax  remained 
almost  the  sole  source  of  revenue.  Of  the  total  general 
fund  receipts  in  1881  of  $8,700,000,  the  general  property 
tax  contributed  $6,300,000.  For  years  the  difficulty  of 
reaching  personal  property,  by  means  of  the  general  prop- 
erty tax,  had  been  recognized,  but  this  fact  only  served  to 
stimulate  efforts  toward  a  more  rigid  enforcement  of  the 
old  system.  The  need  for  revenue  caused  the  state  to  cling 
tenaciously  to  the  system  long  after  the  injustice  and  im- 
possibility of  enforcing  such  a  tax  was  recognized.  The 
numerous  tax  commissions  and  investigating  committees 
had  pointed  out  the  unsatisfactory  workings  of  the  system, 
but  no  attempt  had  been  made  to  face  the  problem  squarely 


146       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [470 

and  solve  it.  The  introduction  of  the  tax  on  corporations, 
in  1880,  was  the  entering  wedge  in  the  breaking  down  of 
the  old  system.  The  large  amount  of  revenue  received  for 
this  source  revealed  the  possibilities  of  a  new  system  of 
taxation.  This  was  soon  followed  by  the  tax  on  inheri- 
tances and  a  tax  on  the  organization  of  corporations.  These 
taxes  relieved  the  strain  on  the  general  property  tax,  and 
now  for  the  first  time  it  became  possible  to  pay  more  atten- 
tion to  justice  and  equality  in  taxation. 

The  rapidly-increasing  expenditures  of  the  state  caused 
it  to  resort  continually  to  newer  forms  of  taxation.  In 
1882,  the  total  expenditures  from  the  general  fund,  not  in- 
cluding contributions  to  sinking  fund,  were  $7,890,000,  and 
in  1 912  the  total  expenditures  for  similar  purposes  were 
$50,036,000,  making  an  increase  in  the  per  capita  expendi- 
ture from  $1.55  to  $5.49. 

In  1893,  the  joint  committee  of  the  Senate  and  Assembly 
reported  as  follows  regarding  taxation :  ( i )  That  state  and 
local  revenues  should  be  separated.  (2)  That  powers  of 
assessors  be  increased.  (3)  That  listing  should  not  be  used. 
(4)  That  personal  debts  be  kept  from  assessed  valuation  of 
property.  (5)  That  a  tax  of  one-half  of  one  per  cent  be 
placed  on  mortgages.  (6)  That  an  income  tax  should  not  be 
introduced.  (7)  That  local  option  should  be  opposed.  (8) 
That  a  graduated  inheritance  tax  be  levied.  (9)  That 
every  foreign  corporation  should  pay  a  tax  of  one-eighth 
of  one  per  cent  on  its  capital  stock.  (10)  That  corporations 
be  subject  to  a  franchise  tax  of  one-fourth  of  a  mill  upon 
each  one  per  cent  of  dividends,  if  dividends  exceed  six  per 
cent.^ 

Many  of  these  recommendations  were  enacted  into  law 
during  the  course  of  the  next  few  years.    In  1896,  a  liquor 

*  Chapman,  State  Tax.  Com.,  pp.  43-45- 


471]  REVENUES  147 

license  tax  was  inaugurated.  In  1905,  a  mortgage-record- 
ing tax  of  five  mills  was  imposed,  and  as  a  concomitant  of 
this  new  tax  law  mortgages  were  exempted  from  all  local 
taxes.  A  tax  of  two  cents  on  each  share  of  stock  of  $100 
face  value  was  introduced  in  1905,  and  was  known  as  the 
stock-transfer  tax,  since  it  was  not  a  tax  on  property  but 
upon  its  transfer.  From  1888  to  19 10,  a  tax  on  racing  as- 
sociations was  imposed,  but  this  was  repealed  by  law  of 
1 9 10.  The  most  recent  taxes  have  been  the  tax  upon  motor 
vehicles  imposed  in  1910,  and  the  secured  debt  tax  of  191 1. 

The  result  of  these  developments  has  been  that  out  of  a 
total  revenue  of  fifty  millions  in  191 2,  these  so-called 
indirect  taxes  contributed  thirty-nine  millions  to  the  annual 
revenue. 

These  sources  were  so  productive  that  no  direct  tax  was 
imposed  upon  the  real  and  personal  property  for  general 
state  purposes  from  1902  to  19 10,  except  a  small  tax  for 
court  expenses.  Not  only  were  the  regular  annual  expenses 
defrayed  in  this  way,  but  the  annual  contributions  to  both 
the  sinking  funds  and  the  support  of  common  schools  were 
paid  out  general  fund  revenues  instead  of  being  raised  by 
direct  tax  levies  as  formerly.  The  yearly  increasing  charges 
to  sinking  funds,  however,  which  resulted  from  the  con- 
tinued issue  of  bonds  for  canal  and  highway  improvement 
purposes,  led  to  the  reimposition,  in  191 1,  of  a  direct  tax  of 
six-tenths  of  a  mill.  This  has  again  brought  into  promi- 
nence the  old  question  of  equalization  of  taxes. 

Some  have  suggested  the  entire  abolition  of  all  taxes  upon 
personal  property.  Others  favor  the  local-option  plan  of 
permitting  each  county  to  decide  whether  it  should  exempt 
personal  property  or  not?  The  danger  of  this  plan  is  that 
counties  which  do  not  exempt  personal  property  will  be 
deprived  of  an  important  source  of  taxation.  The  plan 
which  now  promises  a  satisfactory  solution  of  the  prob- 


148       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [472 

lem  is  the  apportionment  of  the  state  tax  among  the 
various  counties  on  the  basis  of  revenues  raised  locally 
rather  than  on  the  basis  of  aggregate  valuation  of  property. 
The  best  solution  would  seem  to  be  a  rigid  adherence  to  the 
policy  of  separation  of  the  sources  of  state  and  local  reve- 
nues. Leave  the  tax  on  real  estate  to  the  local  subdivisions 
and  allow  the  state  to  secure  its  revenue  from  the  so-called 
indirect  taxes.  If  this  plan  were  carried  out,  it  would 
eliminate  the  necessity  for  equalization  of  county  valuations 
which  has  hitherto  been  a  feat  impossible  of  accomplish- 
ment. 

The  new  system  has  been  in  many  respects  an  unqualified 
success.  It  reaches  the  great  mass  of  intangible  wealth 
which  almost  wholly  escaped  under  the  operation  of  the 
general  property  tax  and  it  secures  a  fair  amount  of  justice 
and  equality  in  the  taxation  of  corporations.  One  advan- 
tage which  was  not  foreseen  at  the  time  of  its  adoption  is 
the  fact  that  the  taxes  on  the  different  classes  of  corpora- 
tions are  payable  at  different  periods  of  the  year,  and  that 
as  a  consequence,  by  a  proper  adjustment  of  the  dates,  an 
even  and  continuous  stream  of  revenue  is  afforded. 

The  theory  of  the  new  system  is  that  different  kinds  of 
property  should  be  taxed  by  different  methods,  but  that  all 
property  of  a  similar  kind  should  be  similarly  taxed.  A 
single  property  tax  would  not  succeed  in  making  the  prop- 
ertyless  man  with  a  large  income  pay  any  taxes.  A  single 
income  tax  would  not  reach  the  large  landholder  who  might 
derive  no  income  from  his  possessions.  The  attempt  to  tax 
all  property  in  the  same  way  produced  injustice  and  ine- 
quality. The  new  method  attempts  to  adjust  the  tax  sys- 
tem to  the  differentiation  in  property  which  has  taken  place, 
which  is  the  only  way  that  justice  and  equality  can  be 
secured. 

Tax  Administration. — The  office  of  State  Assessor  was 


473]  REVENUES  149 

abolished  in  1896  and  a  State  Board  of  Tax  Commissioners 
created.  This  board  has  control  and  supervision  over  the 
local  officials  in  their  assessment  and  collection  of  taxes, 
and  collects  statistics  showing  the  aggregate  valuations  of 
real  and  personal  property,  the  amount  of  property  ex- 
empted from  taxation  classified  as  to  location  and  as  to  use. 
It  has  charge  of  the  equalization  of  assessment,  which  was 
formerly  done  by  the  State  Board  of  Equalization.  The 
rule  adopted  in  this  work  is  as  follows : 

"  First,  the  ratio  or  percentage  which  the  assessed  value  of 
the  real  property  in  each  district  bears  to  its  full  value  is 
established  by  the  board  upon  proper  inquiry  and  investiga- 
tion conducted  by  it.  Second,  from  such  ratio  or  percentage 
value  the  board  then  determines  the  aggregate  full  value  of 
all  real  property  of  each  district  by  dividing  the  assessed  value 
thereof,  by  the  ratio  or  percentage  value  as  ascertained  and 
fixed  for  that  district.  Third,  the  average  rate  of  assessment 
of  the  real  property  in  the  county  is  then  determined  by  divid- 
ing the  aggregate  assessed  value  of  the  real  property  in  all  the 
tax  districts  by  the  aggregate  full  value  thereof  as  ascertained 
in  the  manner  aforesaid.  Fourth,  the  true  equalized  value 
each  tax  district  is  then  determined  by  multiplying  the  full 
value  of  each  real  property  in  that  tax  district  by  the  average 
rate  of  assessment  for  the  county.  Fifth,  deduct  from  or 
add  to  the  assessed  value  of  the  several  tax  districts  the  dif- 
ference between  the  assessed  value  and  the  equalized  value  as 
so  ascertained  so  that  the  amount  which  the  respective  tax 
districts  are  increased  or  diminished  from  the  assessed  value 
will  be  shown  and  the  total  assessed  value  for  the  county  will 
not  be  increased  or  decreased."  ^ 

In  191 1,  the  law  governing  local  assessments  was  radi- 
cally changed.  The  assessment  roll  was  made  to  consist  of 
three  parts :  one  for  real  estate,  one  for  personal  property, 

*  Laws  of  19 II,  chap,  801. 


150       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [474 

and  one  for  special  franchises  and  rents  reserved.  The 
name  of  the  owner  was  no  longer  essential  to  the  validity 
of  an  assessment,  provided  the  property  was  described  with 
sufficient  detail  to  identify  it.  Assessments  were  to  be  made 
against  the  land  itself  and  not  against  the  person,  and  the 
old  distinction  between  resident  and  non-resident  was  abol- 
ished. Assessors  were  authorized  to  adopt  tax  maps  for  the 
district,  and  lot  and  block  numbers  were  declared  to  be  valid 
descriptions.  Property  of  corporations  was  to  be  assessed 
in  the  same  way  as  that  of  individuals. 

Another  important  change  was  made  in  the  assessment 
rolls  in  cities  where  buildings  were  to  be  assessed  separately 
from  the  land.  In  one  column  there  was  set  down  the  value 
of  the  real  property  and  in  another  column  the  value  of  the 
land  exclusive  of  buildings.  The  total  assessment  only 
can  be  reviewed.  This  law  extends  the  plan  of  assessment 
by  lot  or  block,  which  had  been  employed  in  New  York  City 
since  1904,  to  the  local  assessment  throughout  the  state, 
and  lays  the  foundation  for  great  improvements  in  assess- 
ment.  It  will  prevent  errors  and  voidable  assessment  and 
simplify  the  collection  of  taxes. 

In  19 1 2,  the  exemption  for  personal  effects  and  house- 
hold furniture  was  raised  from  $250  to  $1,000. 

Special  Franchise  Assessments. — One  of  the  most  im- 
portant and  at  the  same  time  the  most  difficult  duties  of  the 
State  Board  of  Tax  Commissioners  is  the  assessment  of 
franchises.  The  law  of  1899  niade  taxable  the  value  of  the 
privilege  of  maintaining  wires,  tracks,  pipes,  etc.,  in  public 
highways,  and  directed  this  board  to  assess  such  value.  The 
state  board  at  first  made  the  assessment  at  full  value,  but 
the  courts  held  that  the  corporations  were  entitled  to  have 
the  amount  reduced  to  the  same  percentage  of  full  value  at 
which  ordinary  real  estate  was  assessed.  Since  neither  the 
state  board  or  local  assessor  had  power  to  make  such  re- 


475]  REVENUES  151 

duction,  the  matter  had  to  be  taken  to  the  courts  in  each 
particular  instance  and  the  result  was  endless  litigation. 
Recently  the  state  board  has  been  given  power  to  equalize 
the  special  franchise  assessment,  which  will  do  away  with 
much  of  the  former  litigation.  In  January  ist,  191  o,  there 
were  1,443  cases  of  contested  valuations  in  litigation 
amounting  to  $1,106,150,621. 

The  valuation  of  the  special  franchise  is  one  of  the  most 
perplexing  ([uestions  that  the  state  board  has  to  solve.  The 
general  rule  adopted  is  to  ascertain  the  value  of  the  fran- 
chise through  a  capitalization  of  the  net  earnings.  This  "  is 
arrived  at  by  deducting  from  gross  operating  revenues  all 
operating  expenses,  including  taxes  and  a  fair  return  on  the 
value  of  all  tangible  property  used  in  connection  with  the 
franchise  and  an  amount  annually  in  excess  of  ordinary 
maintenance  sufficient  to  meet  the  permanent  depreciation 
of  the  property."  ^  In  deducting  taxes  it  would  seem  that 
the  board  has  fallen  into  an  error,  and  that  the  state  is  a 
loser  to  that  extent.  There  is  no  reason  why  a  corporation 
should  be  allowed  to  deduct  taxes  in  arriving  at  its  net  earn- 
ings. This  would  appear  clear  if  the  tax  were  an  income 
tax  for  it  would  then  be  seen  that  taxes  are  to  be  paid  out  of 
the  net  income  of  corporations  just  as  out  of  the  net  income 
of  individuals ;  and  while  in  both  cases  they  are  a  necessary 
expense  yet  they  should  not  be  deducted  in  arriving  at  the 
net  income.  The  Interstate  Commerce  Commission  has 
applied  the  rule  correctly  and  does  not  allow  the  deduction 
of  taxes  in  arriving  at  the  net  taxable  income.  It  is  to  be 
noted,  however,  that,  in  the  new  Federal  income  tax,  taxes 
are  deductible  from  gross  income  for  both  individuals  and 
corporations. 

Other  problems  which  await  solution  are  such  questions 

^  A.  R.  State  Board  of  Commissioners,  1909,  p.  5- 


152        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [476 

as  these :  what  constitutes  legitimate  operating  expenses  and 
what  rate  of  capitalization  should  be  employed  in  a  given 
case;  shall  expenditures  for  legal  services  in  fighting  spec- 
ial franchise  valuations  or  losses  resulting  from  bad  man- 
agement be  counted  as  necessary  operating  expenses;  what 
is  the  proper  sum  to  be  allowed  in  a  given  case  ? 

A  terminable  franchise  becomes  less  valuable  as  years 
pass  by.  Again  some  municipalities  granting  franchises 
place  burdens  upon  the  corporations,  such  as  the  require- 
ment to  keep  the  streets  sprinkled  or  to  pave  a  certain  por- 
tion of  the  street.  One  criterion  which  has  been  proposed 
is  that  the  value  of  the  privilege  to  occupy  the  streets  for 
business  purposes  be  at  least  equal  to  the  fee  value  of  the 
land  occupied,  that  is,  equal  to  the  value  of  the  privilege  of 
ocupying  similar  lands  outside  the  street  for  similar  pur- 
poses. 

The  Corporation  Tax 

The  legislature  of  1880  inaugurated  a  system  of  taxing 
the  corporate  franchises  of  the  state  which  was  to  have  far- 
reaching  effects  on  the  financial  history  of  the  state.  The 
system  was  largely  adapted  from  Pennsylvania,  which  had 
had  a  similar  system  in  operation  for  eight  years.  Al- 
though the  state  profited  by  the  experience  of  the  sister  state, 
yet  its  operation  would  have  met  with  serious  retardation 
had  not  the  combined  efforts  of  the  legislature,  the  courts 
and  the  comptroller's  office  been  continually  exerted  to 
make  it  a  success.  The  law  authorized  the  comptroller  to 
levy  and  collect  the  tax  from  certain  corporations  "incorpor- 
ated under  the  laws  of  this  state  or  incorporated  under  the 
laws  of  any  other  state  or  country,  and  doing  business  in 
this  state." 

During  the  first  year  the  amount  collected  wasonly  $141,- 
1 27.    Several  arnbiguous  and  contradictory  expressions  in  the 


477]  REVENUES  153 

law  were  corrected  the  following  year,  and  thus  amended,  it 
formed  the  basis  of  one  of  the  most  important  sources  of 
revenue  for  the  state.  The  estimated  annual  revenue  was 
placed  at  $2,000,000.  By  1896,  it  had  reached  this  figure, 
and  in  1912  the  annual  revenue  amounted  to  over  five  times 
this  sum.  The  reception  accorded  to  the  law  at  first  was 
not  unduly  hostile.  Comptroller  Davenport,  in  1884,  wrote, 
''  It  is  but  fair  to  state  in  this  connection  that  the  corpora- 
tions have  generally  responded  without  cavil,  and  the  points 
at  issue  before  the  courts  are  not  suggestive  of  factitious 
opposition."  ^  Nevertheless,  it  is  not  to  be  supposed  that  all 
the  corporations  submitted  without  opposition.  The  his- 
tory of  the  operation  of  the  law  is  the  history  of  this  long 
and  vigorous  opposition  prosecuted  through  the  courts.  Dur- 
ing the  early  period  the  decisions  of  the  courts  were  as  a 
whole  favorable  to  the  state.  Where  they  were  unfavorable, 
the  law  was  immediately  changed  to  overcome  the  difficulty, 
and  the  result  of  legislation  and  judicial  decisions  working 
hand  in  hand  was  to  produce  an  effective  law. 

The  law  imposed  an  annual  tax  upon  the  franchise  of 
every  corporation,  joint  stock  company  or  association,  doing 
business  within  the  state,  to  be  computed  upon  the  basis  of 
the  amount  of  its  capital  stock  employed  during  the  preced- 
ing year.  Section  i  provided  that  the  corporations  should 
make  reports  to  the  comptroller  on  or  before  November 
fifteenth,  and  prescribed  the  character  of  these  reports. 
Section  2  prescribed  the  penalty  for  failing  to  make  proper 
reports,  which  was  an  additional  tax  of  10  per  cent,  and 
forfeiture  of  charter  at  the  discretion  of  the  governor. 
Section  3  provided  for  the  following  exemptions :  banks  and 
institutions  for  saving,  life-insurance  companies,  foreign 
insurance  companies,  and  manufacturing  or  mining  cor- 

^  A.  R.  Comptroller,  1883,  p.  28. 


134       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [478 

porations  carrying  on  manufacturing  or  mining  within  the 
state.  The  exemptions  did  not  apply  to  gas  or  trust 
companies.  The  tax  was  to  be  one-fourth  of  a  mill  for 
each  one  per  cent  of  dividends  upon  the  capital  stock  of 
every  corporation  declaring  dividends  of  six  per  cent  or 
more,  and  upon  those  not  declaring  any  dividends,  or 
declaring  less  than  six  per  cent,  the  tax  was  to  be  one  and 
a  half  mills  upon  each  dollar  of  the  capital  stock.  The 
tax  was  payable  between  January  ist  and  the  15th.  Sec- 
tion 5  provided  for  the  taxation  of  insurance  companies, 
both  domestic  and  foreign,  with  the  exception  of  life-insur- 
ance companies  and  mutual-benefit  associations.  These 
were  to  report  on  August  ist,  and  the  tax  was  to  be  eight- 
tenths  of  one  per  cent  on  the  gross  amount  of  premiums. 
Section  6  imposed  a  tax  of  five-tenths  of  one  per  cent  upon 
the  gross  earnings  of  transportation,  telephone,  and  tele- 
graph companies.  These  companies  were  required  to  pay 
the  tax  on  August  ist.  All  corporations  were  exempted 
from  taxation  for  state  purposes,  except  upon  their  real 
estate,  but  they  were  still  liable  to  the  local  taxation  on  both 
real  and  personal  property.  The  revenue  was  made  appli- 
cable to  the  ordinary  current  expenses  of  the  state. 

The  rates  of  the  general  corporation  tax  were  further 
differentiated  in  1901,  being  fixed  at  one-fourth,  three- 
fourths  or  one  and  one-half  per  mill,  respectively,  accord- 
ing to  the  amount  of  business  and  the  character  of  the  en- 
terprise. 

The  first  difficulty  encountered  in  the  enforcement  of  the 
law  was  the  task  of  getting  a  correct  list  of  the  corpora- 
tions. The  first  year  only  643  corporations  were  on  the  list. 
The  department  worked  hard  and  faithfully  to  add  new  cor- 
porations to  the  list,  and  the  number  increased  year  by  year. 

In  1893,  ^  l^-w  was  passed  which  was  of  great  assistance 
to  the  corporation  bureau.    It  required  all  foreign  corpora- 


479]  REVENUES  1 55 

tions  to  secure  from  the  secretary  of  state  a  certificate 
showing  that  they  had  complied  with  all  the  requirements  of 
the  law  before  they  could  do  business  in  the  state.  Before 
this  certificate  was  granted,  certain  papers  had  to  be  filed, 
including  a  copy  of  the  charter.  By  examining  these  papers 
filed  with  the  secretary  of  state,  the  comptroller  was  able 
to  obtain  the  names  and  places  of  business  of  a  large  num- 
ber of  corporations  which  had  heretofore  escaped  taxation. 
Two  years  later,  Comptroller  Roberts  undertook  the  work 
of  placing  every  corporation  subject  to  the  tax  upon  the 
books  of  the  department.  A  careful  and  thorough  survey 
of  the  state  was  undertaken.  Competent  men  were  sent  to 
each  county  clerk's  office  in  the  state  to  obtain  a  complete 
list  and  to  ascertain  if  these  corporations  were  still  in  exist- 
ence, and  to  secure  all  possible  information  regarding  the 
existing  company.  The  work  exceeded  the  expectations  of 
the  department.  The  number  of  taxable  corporations  in- 
creased from  2,297  in  1^94  to  4,401  in  1896.  A  modem 
system  of  bookkeeping  was  installed  in  the  corporation  tax 
department  and  the  work  was  thoroughly  systematized. 

The  number  of  corporations  taxed  has  increased  from 
year  to  year  both  through  discovering  new  corporations 
under  the  old  provisions  of  the  law,  and  by  adding  new 
classes  of  corporations.  License  fees  on  foreign  corpora- 
tions were  imposed  in  1895,  ^^^  still  later  saving  banks 
were  brought  under  the  provisions  of  the  statute.  In  19 12, 
report  blanks  were  sent  out  to  over  40,000  separate  corpora- 
tions. The  work  connected  with  the  taxation  of  so 
many  corporations  grew  from  that  which  could  be  per- 
formed by  one  clerk  to  a  volume  that  required  a  large  office 
force.  In  191 2  the  corporation  tax  bureau  employed  six- 
teen salaried  officials,  including  examiners  located  in  the 
offices  at  New  York  and  Buffalo. 

One  reason  the  law  worked  so  well  was  that  large  powers 


1^6       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [480 

were  conferred  upon  the  comptroller  in  the  matter  of  secur- 
ing satisfactory  reports  from  the  corporations.  He  was 
given  power  to  examine  books,  records  and  papers,  to  issue 
subpoenas  requiring  the  appearance  of  persons,  and  such 
books  and  documents  as  might  be  necessary  to  determine 
the  tax.  The  books  of  corporations  which  failed  to  report, 
or  which  made  unsatisfactory  reports,  were  examined  by 
special  examiners.  In  1892,  189  corporations  located  in 
New  York  and  Brooklyn  were  examined,  and  this  work  has 
now  grown  so  as  to  demand  a  continuous  staff  of  men  for 
this  purpose. 

The  reports  of  corporations  and  the  time  of  payment  are 
as  follows:  Corporations  paying  the  franchise  tax  on  the 
amount  of  their  capital  stock  are  required  to  report  by  No- 
vember 15th,  and  the  tax  is  payable  January  15th  follow- 
ing ;  transportation,  elevated  and  surface  railway  companies 
must  report  and  pay  the  tax  on  August  ist;  waterworks, 
gas  and  electric  companies  must  report  by  December  ist; 
insurance  corporations  report  March  ist,  and  pay  their  tax 
by  June  ist;  foreign  banks  report  and  pay  by  February  ist; 
trust  companies  and  savings  banks  must  report  by  August 
1st,  and  pay  the  tax  September  ist.  If  reports  are  not  made 
or  the  taxes  not  paid  within  thirty  days  after  they  become 
due,  the  corporations  are  liable  to  an  additional  fine  of  five 
per  cent  of  the  tax  and  one  per  cent  additional  for  each 
month  the  tax  remains  unpaid.  If  the  annual  report  or 
special  report  is  not  made  within  a  reasonable  time  specified 
by  the  comptroller,  the  corporation  forfeits  $100  for  every 
such  failure  and  $10  for  each  day  that  such  failure  con- 
tinues. The  officials  of  each  corporation  not  paying  divi- 
dends, or  paying  less  than  six  per  cent,  must  estimate  and 
appraise  the  value  of  the  stock  between  November  ist  and 
the  15th,  and  report  the  amount  to  the  comptroller.  Every 
report  must  have  annexed  to  it  a  signed  statement  that  the 


48 1]  REVENUES  157 

Statement  contained  in  it  is  true.  After  fixing  the  amount 
of  the  tax,  the  notice  is  mailed  to  the  post-office  address  of 
the  corporation,  and  the  accounts  bear  interest  beginning 
with  thirty  days  after  the  sending  of  this  notice. 

The  comptroller  is  allowed  to  revise  and  readjust  ac- 
counts upon  complaints  of  the  corporations,  accompanied  by 
sufficient  evidence,  and  the  determination  of  the  comptroller 
is  subject  to  review  upon  both  the  law  and  the  facts  by 
certiorari  to  the  Supreme  Court.  The  application  must  be 
made  within  thirty  days  after  the  determination  of  the 
comptroller,  and  eight  days'  notice  must  be  given  of  the  ap- 
plication for  such  writ. 

The  comptroller  may  issue  a  warrant  to  the  sheriff  of 
any  county  commanding  him  to  levy  upon  and  sell  the  prop- 
erty of  any  corporation  to  satisfy  the  tax.  This  provision 
has  proven  to  be  unsatisfactory  and  impossible  of  opera- 
tion in  many  cases  where  the  property  consists  of  good-will, 
services,  or  agency  rights,  which  cannot  be  levied  upon  or 
sold.  Another  cumbersome  provision  is  that  requiring  the 
action  of  the  attorney-general  to  bring  about  the  annul- 
ment of  the  charter  in  cases  where  taxes  are  not  paid.  It 
might  be  wise  to  give  the  comptroller  power  to  annul  char- 
ters after  two  years'  delinquency.  The  average  annual  de- 
linquency is  about  five  per  cent  of  the  aggregate  number  of 
corporations,  or  between  five  hundred  and  seven  hundred 
every  year. 

Any  person  who  gives  information  of  delinquency  which 
leads  to  the  recovery  of  taxes  due  the  state  may  receive  a 
sum  not  exceeding  10  per  cent  of  the  sums  collected. 

The  secretary  of  state  is  required  to  make  monthly  re- 
ports to  the  comptroller  of  the  corporations  whose  certifi- 
cates of  incorporation  are  filed  and  of  the  foreign  corpora- 
tions to  which  a  certificate  of  authority  has  been  issued  to 
do  business  within  the  state  during  the  preceding  month. 


138       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [482 

In  1895,  a  license  fee  of  one-eighth  of  one  per  cent  was 
imposed  upon  the  capital  of  foreign  corporations  doing  busi- 
ness in  the  state,  and  upon  an  increase  in  their  capital.  This 
did  not  apply  to  banking  corporations,  fire,  marine,  casualty 
or  life  insurance  companies,  or  building  and  loan  associa- 
tions. The  measure  of  the  amount  of  capital  stock  employed 
is  such  a  portion  of  the  issued  capital  stock  as  the  gross 
assets  employed  in  any  business  within  the  state  bear  to  the 
gross  assets  wherever  employed  in  business.  Such  cor- 
porations are  denied  the  protection  of  the  courts,  if  within 
thirteen  months  from  the  beginning  of  the  business  in  the 
state  they  have  not  obtained  a  receipt  from  the  comptroller 
for  payment  of  this  tax.^ 

In  1 90 1,  trust  companies,  which  were  formerly  taxed 
under  Section  182  of  the  tax  law,  were  required  to  pay  an 
annual  franchise  tax  of  one  per  cent  on  the  amount  of  their 
capital  stock,  surplus  and  undivided  profits.  Savings  banks 
were  taxed  one  per  cent  annually  on  the  par  value  of 
their  surplus  and  undivided  earnings.  Corporations  holding 
state  bonds  were  to  be  credited  annually  with  an  amount 
equal  to  one  per  cent  of  the  par  value  of  all  such  bonds, 
bearing  interest  at  a  rate  not  exceeding  three  per  cent,  pro- 
vided that  they  should  never  be  credited  with  an  amount  in 
excess  of  the  amount  due  the  state.  The  tax  on  surplus  and 
undivided  earnings  of  savings  banks  met  with  serious  oppo- 
sition. It  was  contended  that  assessments  were  excessive; 
that  surplus  invested  in  federal  securities  could  not  be  con- 
sidered in  computing  the  tax;  that  securities  above  par 
should  be  taken  at  their  par  value  and  those  below  par  at 
their  market  value;  and  finally  that  the  law  was  unconsti- 
tutional. 

The  question  of  computing  the  surplus  presented  a  diffi- 

*  Imws  of  1895,  chap.  240. 


483]  REVENUES  159 

cult  problem.  If  computed  on  the  market  value,  the  amount 
would  equal  $115,000,000,  but  if  computed  on  the  par  value 
the  amount  would  equal  $69,000,000.  The  ratio  of  par  to 
market  value  varied  from  20  to  60  per  cent,  and  thus  the  law 
requiring  it  to  be  computed  on  par  value  created  inequality.^ 

Life-insurance  companies  and  foreign-insurance  com- 
panies were  taxed  under  section  5,  which  imposed  a  tax  of 
eight-tenths  of  one  per  cent  upon  the  gross  amount  of  the 
premiums.  Mutual-benefit  associations  were  exempted 
from  the  provisions  of  the  law.  In  1886,  the  tax  on  the 
premiums  of  fire  and  marine  insurance  companies  was  re- 
duced to  one  and  one-half  per  cent  on  their  gross  premiums, 
and  the  personal  property  of  all  insurance  companies  was 
exempted  from  assessment.  They  were  thus  released  from 
taxation  on  their  capital.  In  1887,  all  life  insurance  and  in- 
dustrial insurance  companies  were  exempted  from  taxation 
on  their  premiums  and  released  from  paying  the  arrears  due 
under  the  act  of  1880. 

The  present  law  imposes  a  tax  of  one  per  cent  upon  the 
gross  premium  of  domestic  insurance  corporations,  foreign 
corporations  of  other  states,  except  those  doing  a  marine 
and  fire-insurance  business  and  upon  all  foreign  corpora- 
tions of  foreign  countries,  except  life  or  casualty  insurance 
companies.  Foreign  fire  and  marine  insurance  companies 
of  foreign  countries  paid  five-tenths  of  one  per  cent  on  their 
gross  premium.  This  section  does  not  apply  to  fraternal 
societies,  town  or  county  co-operative  insurance  associa- 
tions, nor  to  any  corporation  subject  to  the  supervision  of 
the  Superintendent  of  Banks.  In  assessing  taxes  under  the 
reciprocal  provision  of  section  34  of  the  insurance  law, 
credit  was  allowed  for  any  taxes  paid  under  that  section." 
Other  taxes  are  levied  on  insurance  companies  under  the 
provisions  of  the  insurance  law. 

*  Art.  ix,  sees.  188-189.  '  Ibid.,  sec.  187. 


l6o       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [484 

Every  foreign  banker  doing  business  in  the  state  must 
pay  annually  a  tax  of  five  per  cent  on  the  amount  of  interest 
earned  and  collected  by  him  on  money  loaned,  used  or  em- 
ployed in  the  state.  This  includes  every  foreign  corporation 
except  national  banks,  and  every  unincorporated  company 
organized  under  the  laws  of  another  state  and  every  unin- 
corporated company  of  two  or  more  individuals  owning 
more  than  a  majority  interest,  and  every  non-resident  of 
this  state  doing  a  banking  business  in  the  state. 

In  1882,  banks  were  required  to  pay  to  the  comptroller, 
on  February  ist,  one-half  of  one  per  cent  upon  the  average 
deposits  and  sums  employed  in  their  business  during  the 
preceding  year,  but  these  sums  were  not  due  under  the  cor- 
poration law.  It  taxes  only  the  income  or  interest  of  for- 
eign banks. 

Judicial  Decisions. — The  chief  difficulty  in  the  enforce- 
ment of  the  corporation  law  arose  in  connection  with  sec- 
tion 3,  which  provided  for  the  taxation  of  corporations  upon 
their  capital  stock.  Nearly  every  clause  in  the  section  was 
made  the  subject  of  a  judicial  interpretation.  The  question 
immediately  arose  as  to  what  was  meant  by  capital  stock, 
and  how  it  should  be  computed.  The  corporations  opposed 
the  payment  of  taxes  wherever  a  loophole  presented  itself. 
The  opposition  was  long  and  vigorously  prosecuted,  and 
after  nearly  a  quarter  of  a  century  of  litigation  this  is  still 
the  most  unsatisfactory  section  of  the  corporation  law. 

The  exemptions  granted  to  mining  and  manufacturing 
companies  presented  by  far  the  most  difficult  problem  in  the 
administration  of  the  law,  and  especially  those  companies 
organized  outside  of  the  state  furnished  the  chief  causes  for 
litigation.  The  attorney-general  interpreted  the  term  "  capi- 
tal stock  "  to  mean  the  total  capital  of  organizations  without 
regard  to  the  amount  actually  employed  in  the  state.  In 
1885,  the  law  was  amended  so  as  to  include  only  that  part 


485]  REVENUES  161 

of  the  stock  which  was  actually  employed  in  the  state. 
Those  companies  which  had  previously  paid  the  tax  upon 
their  total  capital  stock  now  applied  for  rebates,  and,  in 
1887,  rebates  were  allowed  to  the  amount  of  $279,068. 
The  comptroller  had  no  authority  to  make  such  settlements 
until  1889,  when  he  was  given  power  to  readjust  accounts 
for  taxes  which  had  been  illegally  assessed.^ 

The  term  "  capital  stock  "  was  defined  to  mean  not  share 
stock  but  the  property  of  the  corporation  contributed  by  its 
stockholders,  or  otherwise  obtained.^  In  another  case  it 
was  held  that  the  comptroller,  in  estimating  and  apprais- 
ing capital  stock  of  railroad  companies,  complied  with  the 
statute  when  he  fixed  the  valuation  at  the  average  price  at 
which  the  stock  sold  during  the  year,  and  it  was  not  neces- 
sary to  ascertain  the  actual  value  of  the  stock  in  each  case, 
unless  it  exceeded  the  market  value. ^  The  question  arose 
as  to  whether  the  surplus  was  to  be  included  in  determining 
the  value  of  the  capital  stock.  It  was  included  in  the  taxa- 
tion of  domestic  corporations,  but  the  surplus  of  foreign 
corporations  escaped.     A  few  examples  may  be  cited. 

The  Singer  Manufacturing  Co.,  a  foreign  corporation, 
invested  its  surplus  in  New  York  real  estate,  and  the  court 
held  that  this  did  not  constitute  employment  of  capital  in 
the  state,  and  hence  the  capital  was  not  subject  to  taxa- 
tion.* A  similar  case  was  presented  in  the  case  of  Niagara 
River  Hydraulic  Co.,  a  domestic  corporation,  incorporated 
for  the  purpose  of  purchasing  real  estate.  This  company 
had  $125,000  of  capital  invested  in  real  estate,  and  the  court 
held  that  such  investment  did  not  constitute  doing  business 
in  the  state.     The  court  said,  "If  capital  can  be  invested 

1  Chap.  463-  '  82  Hun.,  313. 

*  90  Hun,  p.  537.  *  78  Hun.,  53. 


1 62        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [486 

without  being  employed,  the  case  before  us  seems  to  be  a 
fair  instance  of  it."  ^  A  corporation's  investment  in  tene- 
ment houses  and  in  municipal  bonds  was  held  to  be  exempt 
from  taxation.  The  theory  of  these  cases  appears  to  have 
been  that  capital  employed  means  capital  actively  employed 
in  order  to  subject  it  to  taxation.  Again  foreign  corpora- 
tions escaped  taxation  upon  the  ground  that  the  money  in- 
vested in  New  York  was  not  capital,  but  represented  sur- 
plus, and  the  court  held  that  surplus  was  not  taxable. 

The  question  of  what  constituted  doing  business  in  the 
state,  what  constituted  a  manufacturing  company,  and  what 
kind  of  companies  were  subject  to  the  provisions  of  the  law, 
all  came  before  the  courts  to  be  decided.  The  American 
Bell  Telephone  Co.,  a  Massachusetts  corporation,  with  its 
general  offices  in  Boston,  executed  leases  to  local  telephone 
companies  in  New  York  State  to  use  its  instruments,  and 
this  was  held  not  to  constitute  transactions  of  business  in  the 
state.  The  express  companies  paid  the  tax  on  gross  earnings, 
but  contested  the  obligation  to  pay  any  tax  upon  their  capi- 
tal upon  the  ground  that  they  were  not  incorporated  under 
the  laws  of  this  state  or  any  other  state.  The  court  held 
that  an  express  company,  organized  as  a  stock  company 
and  doing  express  business,  was  liable  to  taxation  on  its 
capital.^ 

The  question  of  what  was  a  manufacturing  company  con- 
tinued to  be  a  stumbling-block  to  the  courts  and  tax  as- 
sessors. In  one  case  the  court  held  that  the  operation  of 
grinding,  roasting  and  packing  coffee  was  not  manufactur- 
ing, and  in  another  case  it  held  that  the  cutting,  splitting 
and  bundling  of  slabs  of  wood  from  saw  logs  was  a  manu- 
facturing process.     Corporations  employing  a  part  of  their 

^  A.  R.  Comptroller,  1900,  p.  xix. 
»  117  N.  Y.,  136. 


487]  REVENUES  163 

capital  in  purchasing  goods  of  foreign  mainufacture  were 
held  to  be  not  wholly  engaged  in  manufacturing,  and  hence 
not  exempt  from  the  tax.  Electric-light  companies  sought 
to  secure  exemption  under  the  provision  exempting  manu- 
facturing companies,  but  the  courts  held  them  liable  to  the 
tax,  and  in  1890  the  law  was  amended  so  as  expressly  to 
include  electric,  steam,  heating,  lighting  and  power  com- 
panies, and  made  them  subject  to  a  tax  on  capital.^ 

The  problem  of  exempting  manufacturing  corporations 
introduced  a  needless  complication  of  the  law,  which  might 
better  have  been  omitted  altogether.  All  corporations  might 
have  been  taxed  alike  and,  if  desirable,  some  could  have 
been  taxed  at  a  lower  rate.  Only  so  much  capital  as  was 
represented  by  the  assessed  valuation  of  the  real  estate  and 
machinery  of  the  plant  might  have  been  exempted.  As  the 
law  worked,  a  manufacturing  corporation  could  subject 
itself  to  taxation  on  the  amount  of  its  capital  employed  in 
manufacturing  and  thereby  secure  exemption  from  taxation 
locally  on  all  its  personal  property  for  state  purposes. 

Another  method  of  evading  the  tax  began  to  appear 
about  1896,  when  the  public  service  corporations  began 
to  issue  bonds,  the  interest  upon  which  equaled  or 
exceeded  the  earning  capacity  of  the  company.  "  Such 
companies  very  frequently  meet  their  entire  outlay  by  the 
sale  of  bonds,  and  the  stock  is  given  as  a  bonus  to  the  bond- 
holder, or  retained  by  the  promoters."  ^  One  example  may 
be  cited.  A  water-works  company  organized  with  a  capi- 
tal of  $80,000.  Its  gross  earnings  were  $36,365,  and  its 
operating  expenses  $23,358,  leaving  a  net  income  of  $13,- 
007;  but  the  interest  charged  upon  the  great  amount  of 
bonds  outstanding  was  $50,894,  which  made  a  deficit  of 

*  58  Hun.,  594,  and  Laws  of  1890,  chap.  522. 
^  A.  R.  Comptroller,  1896,  p.  ix. 


164       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [488 

$37,886.  The  law  met  this  evasion  by  exempting  these  com- 
panies from  any  taxation  on  their  capital,  and  by  taxing 
them  on  their  gross  earnings  only.^ 

Turning  now  from  the  difficulties  involved  in  the  taxation 
of  capital  stock,  we  take  up  next  the  question  of  the  taxa- 
tion of  transportation  and  transmission  companies. 

The  railroads,  telegraph  and  telephone  companies,  which 
paid  over  two-thirds  of  the  tax  collected,  as  a  rule  paid 
fairly  promptly,  and  comparatively  little  litigation  was  nec- 
essary. 

The  Western  Union  Telegraph  Co.  was  an  important  ex- 
ception to  this  rule.  It  was  organized  with  a  capital  of 
$80,000,000,  but  it  returned  only  $800,000  as  the  capital 
taxable  in  the  state.  After  several  attempts  to  secure  a  fair 
report  a  suit  was  commenced  by  the  attorney-general  for 
the  tax  based  upon  the  entire  capital,  with  a  10  per  cent 
penalty  added.  A  judgment  was  rendered  for  the  full 
amount  claimed,  with  costs,  amounting  to  $179,371.^ 

United  States  Supreme  Court  decisions  of  the  early 
eighties  held  that  it  was  illegal  for  a  state  to  tax  transpor- 
tation corporations  on  gross  earnings  derived  from  inter- 
state commerce.  Considerable  sums  which  had  been  col- 
lected from  these  companies  had  to  be  refunded  from  the 
treasury,  and  for  a  number  of  years  afterwards  these  cor- 
porations were  taxed  only  on  the  gross  earnings  from  busi- 
ness wholly  transacted  within  the  boundaries  of  the  state.* 
A  decision  of  this  court  in  1891,  however,  held  in  sub- 
stance that  a  tax  upon  the  franchise  might  be  lawfully 
imposed  based  upon  the  entire  amount  of  gross  earnings. 
The  theory  was  that  the  tax  was  not  levied   upon  the 

*  Laws  of  1896,  chap.  908. 

*  A.  R.  Comptroller,  1886,  p.  12. 
^Ibid.,  1888,  p.  15. 


489]  REVENUES  165 

earnings  but  upon  the  franchise,  and  the  earnings 
merely  constituted  the  base  for  ascertaining  the  amount. 
The  present  law  imposes  an  annual  license  fee  of  five- 
tenths  of  one  per  cent  upon  the  gross  earnings  of  transpor- 
tation and  transmission  companies  arising  from  business 
"  originating  and  terminating  within  this  state,  but  shall 
not  include  earnings  derived  from  business  of  an  interstate 
character."  The  method  of  computing  the  tax  was  not 
changed  in  accordance  with  the  later  decision. 

Elevated  and  surface  railroads  not  operated  by  steam 
pay  an  annual  tax  of  one  per  cent  upon  the  gross 
earnings  from  all  sources  within  the  state,  and  three  per 
cent  upon  the  amount  of  dividends  declared  in  excess  of 
four  per  cent  upon  the  actual  amount  of  paid-up  capital 
employed.  Water,  gas,  electricity  and  power  companies 
pay  five-tenths  of  one  per  cent  upon  their  gross  earnings, 
and  three  per  cent  upon  the  dividend  declared  in  excess  of 
four  per  cent.  The  term  "  gross  earnings  "  means  all  re- 
ceipts from  the  employment  of  capital  without  any  de- 
ductions. 

When  the  law  was  first  passed,  the  criticism  was 
made  that  foreign  corporations  would  be  driven  out  of  the 
state.  This  result  did  not  follow,  however,  since  the  taxes 
were  imposed  upon  domestic  and  foreign  corporations  alike ; 
if  there  was  any  preference  it  was  in  favor  of  the  foreign 
corporations.  They  were  entitled  to  the  same  protection 
and  enjoyed  the  same  opportunities,  and  hence  it  was  only 
just  that  they  should  be  made  to  contribute  to  the  support  of 
the  state  government  by  which  they  were  guaranteed  pro- 
tection. No  tendency  to  leave  the  state  was  noticeable  until 
about  1895,  when  some  companies  began  to  leave  New  York 
and  incorporate  under  New  Jersey  laws,  since  the  latter 
charged  only  one-fiftieth  of  one  per  cent  while  New  York 
charged  one-eight  of  one  per  cent.    In  1897,  New  Jersey  in- 


1 66       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [490 

corporated  $3,000,000,000  of  capital,  while  New  York  in- 
corporated only  $380,000,000.  To  meet  this  competition 
on  the  part  of  New  Jersey,  the  incorporation  fee  was 
reduced  from  one-eighth  to  one-twentieth  of  one  per  cent, 
which  is  the  present  rate. 

The  theory  of  the  taxation  of  corporations  was  well 
summed  up  in  the  case  of  Parke,  Davis  and  Co.  v.  Roberts, 
where  it  was  held  that  the  rights  of  citizens  to  associate 
themselves  together,  to  do  business  as  a  corporation,  was 
not  a  natural  or  inherent  right,  but  was  a  special  privilege, 
granted  by  a  sovereign  power.  Corporations  are  not  citi- 
zens, and  the  state  has  a  right  to  exclude  foreign  corpora- 
tions. A  state  may  impose  upon  a  foreign  corporation  such 
reasonable  conditions  as  it  deems  proper. 

The  success  of  a  tax  has  been  due  to  the  co-operation  of 
the  three  departments,  namely,  the  comptroller's  depart- 
ment, the  legislature  and  the  courts.  The  suggestions  of 
the  comptroller  have  generally  been  promptly  incorporated 
into  law.  The  decisions  of  the  courts  have  been  usually 
followed  by  amendments  to  overcome  the  effect  of  unfavor- 
able decisions,  and  the  comptroller  has  been  untiring  in  his 
efforts  to  tax  every  corporation  that  was  subject  to  the  tax. 
The  evolution  of  the  law  from  its  crude  form  of  a  quarter 
of  a  century  ago  to  its  present  shape  is  a  good  example  of 
what  may  be  accomplished  by  co-ordinating  the  three  de- 
partments of  a  government  in  a  harmonious  working  sys- 
tem, and  such  achievement  augurs  well  for  the  future  of 
our  form  of  government.  Another  important  factor  in  the 
success  of  the  law  has  been  the  large  administrative  powers 
given  to  the  comptroller.  These  powers  have  been  com- 
mensurate with  the  duties  to  be  performed  and  the  result 
has  been  noteworthy. 

The  law  as  it  stands  to-day  needs  amendment  in 
several    important   particulars,   and   during   the   last   five 


491]  REVENUES  167 

years  bills  have  been  repeatedly  presented  to  the  legis- 
lature incorporating  the  changes  which  the  corporation 
bureau  has  found  to  be  needed.  For  one  reason  or  another, 
however,  these  bills  have  not  been  enacted  into  law.  The 
attitude  of  the  legislature  towards  amending  the  corporation 
tax  law  during  the  last  few  years  is  in  marked  contrast  to 
the  position  which  the  legislature  has  assumed  during  the 
quarter  of  a  century  following  the  enactment  of  the  law, 
which  we  have  just  described.  Several  changes  are 
necessary  to  bring  the  language  of  the  statute  into 
harmony  with  recent  court  decisions.  The  court  has 
held  that  a  company  engaged  in  purely  speculative  pur- 
chase and  sale  might  be  "  employing  capital  "  in  the  state, 
although  it  was  not  "  doing  business  "  in  the  state,  and  for 
this  reason  the  words  "  doing  business  "  should  be  stricken 
out  and  the  words  "  employing  capital  "  inserted  in  place 
thereof.  In  section  198  the  word  "  legally "  should  be 
stricken  out  and  "  illegally  "  inserted  in  order  to  correct 
an  error  which  has  existed  for  many  years  in  this  section. 
Section  182  of  the  law  needs  to  be  revised  in  order  to 
lessen  the  opportunities  for  evasion,  especially  by  foreign 
corporations.  As  the  law  now  stands  and  as  it  has  been 
interpreted  by  the  courts,  the  evasions  result  in  a  loss  of 
about  $500,000  a  year  in  revenue  to  the  state. 

The  proposed  changes  in  this  section  provide  that  the 
capital  stock  of  any  taxable  company  shall  not  be  taxed  at 
less  than  three-fourths  of  one  mill  on  the  dollar.  This 
minimum  tax  of  three-fourths  of  a  mill  on  the  dollar  of 
issued  capital  stock  is  only  three-fourths  of  the  rate  levied 
by  the  state  of  New  Jersey  under  similar  circumstances. 
Further  changes  suggested  are  that  if  a  dividend  of  less 
than  six  per  cent  is  declared,  the  tax  should  be  one  and 
one-half  mills  on  each  dollar  of  the  valuation  of  the  capital 
stock ;  but  if  a  dividend  of  six  per  cent  or  more  is  declared, 


l68       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [492 

the  rate  should  be  a  quarter  of  a  mill  for  each  one  per  cent 
of  dividends.  Every  corporation,  subject  to  assessment 
under  section  182,  should,  however,  pay  a  privilege  tax  of 
at  least  five  dollars. 

Under  the  existing  law  only  fifteen  days  are  permitted  in 
which  to  report.  This  time  is  quite  inadequate,  and  fail- 
ure to  comply  therewith  might  in  some  cases  result  in 
almost  disastrous  penalization.  It  is  urged  that  the  comp- 
troller be  given  power  to  extend  the  time  during  which  a 
report  may  be  made  to  him. 

"  To  allow  the  statute  to  remain  as  it  is  today  is  to  continue 
an  almost  intolerable  confusion  of  the  administration  of  this 
law,  the  throwing  open  of  the  doors  of  evasion  to  many  cor- 
porations which  should  be  taxed,  the  loss  of  at  least  a  half  a 
million  dollars  income  annually  to  the  state  and  the  retention 
upon  the  statute  books  of  a  prolix,  ambiguous  and  unneces- 
sarily complicated  statute."  ^ 

The  Organization  Tax 

In  1886,  a  tax  of  one-eighth  of  one  per  cent  was  imposed 
upon  the  authorized  capital  stock  of  every  corporation  in- 
corporated in  the  state,  as  well  as  upon  the  subse- 
quent increased  capital.  The  rate  was  later  on  reduced 
to  one-twentieth  of  one  per  cent,  and  the  minimum  charge 
was  fixed  at  $5.  This  section  did  not  apply  to  state  and 
national  banks,  or  to  buildings,  mutual  loan,  and  co-oper- 
ative associations.  No  corporation  can  receive  a  certificate 
of  incorporation  without  showing  a  receipt  for  this  tax. 
Railroad  corporations  must  pay  the  tax  before  the  Public 
Service  Commission  can  grant  a  certificate.    In  case  of  con- 

*  Memorandum  of  J.  J.  Merrill,  Chief  Corporation  Tax  Bureau,  pre- 
pared in  support  of  proposed  changes  in  law. 


493]  REVENUES  169 

solidation,  the  tax  is  due  only  upon  the  excess  of  aggregate 
capital  over  the  amount  held  by  the  old  corporation.^ 

The  Inheritance  Tax 

In  1885,  a  tax  of  5  per  cent  was  imposed  upon  such  prop- 
erty as  might  pass  by  will  to  persons  other  than  the  parents, 
descendants  and  certain  other  immediate  relatives  of  the 
deceased.^  The  immediate  relatives,  such  as,  "  father, 
mother,  husband,  wife,  children,  brother  and  sister  and 
lineal  descendants,  born  in  lawful  wedlock,  and  the  wife  or 
widow  of  a  son,  and  the  husband  of  a  daughter,"  and  be- 
quests to  institutions  exempted  by  law  from  taxation,  were 
exempted,  and  only  those  collateral  relatives  receiving  over 
$500  were  taxed. 

The  constitutionality  of  the  tax  was  immediately  ques- 
tioned, and  during  the  following  year  the  court  of  appeals 
upheld  its  constitutionality.^ 

In  1885,  1887  and  1891,  the  law  was  changed  in  certain 
important  respects,  and  in  1892,  the  law  was  completely 
revised  *  and  as  revised  and  amended  in  this  year  it  formed 
the  basis  of  one  of  the  most  important  sources  of  revenue. 
A  tax  of  $1  upon  every  $100  was  imposed  upon  the  trans- 
fer of  personal  property  to  immediate  relatives  in  excess  of 
$io,cx)0.  Estates  of  less  value  were  exempted.  The  tax 
of  5  per  cent  on  collateral  heirs  was  still  retained.  Prop- 
erty bequeathed  to  bishops  or  to  religious  corporations  was 
exempted. 

The  law  now  had  to  be  interpreted  by  the  courts.  Among 
the  first  questions  to  be  raised  was  the  question  whether 

^  New  York  Phonograph  Company  vs.  Rice,  57  Hun.,  486. 

"  Laws  1885,  chap.  483. 

»  Matter  of  McPherson,  104  N.  Y.,  306. 

*  Laws  1892,  chap.  399. 


lyo       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [494 

single  bequests  below  the  taxable  figure  were  taxable,  al- 
though the  aggregate  estate  might  be  taxable.  The  court 
decided  that  the  estate  and  not  the  amount  of  the  individual 
bequest  fixed  the  liability  for  the  tax.^  Another  court  de- 
cision was  to  the  effect  that  the  proceeds  of  an  insurance 
policy  payable  to  the  insured  were  taxable  assets  of  a  de- 
cedent estate.  Bequests  to  the  United  States  and  to  foreign 
religious  corporations  were  held  to  be  subject  to  the  tax. 

Two  amendments  were  made  in  1898,  one  taxing  govern- 
ment bonds,  and  the  other  defining  the  mutually  acknowl- 
edged relation  of  parent  and  child,  and  providing  that  the 
relationship  should  have  begun  at  or  before  the  legatee's 
fifteenth  birthday,  and  have  been  continuous  for  ten  years 
after.  The  effect  of  this  amendment  was  to  nullify  the 
legal  decision  which  had  held  that  such  relationship  could 
exist  indiscriminately  between  adults  and  others. 

The  question  of  taxing  United  States  bonds  was  held  to 
be  justifiable  by  the  Supreme  Court,  since  the  right  to  tax 
property  by  will  was  derived  from  and  regulated  by  the 
state  law,  and  the  tax  was  imposed  upon  this  right  and 
privilege.^  It  was  a  debated  point  whether  the  tax  should 
be  assessed  upon  the  transfer  of  property  to  a  municipality 
to  be  held  for  public  use.  In  the  matter  of  Thrall  ^  the  court 
reversed  its  former  decision,*  and  decided  that  a  bequest  of 
$3,000  to  Middletown  for  the  erection  of  a  public  library 
was  exempt  from  taxation.  In  1900,  the  law  was  so 
amended  as  to  make  it  apply  to  such  cases. 

The  funds  of  a  non-resident  decedent  deposited  with  a 
New  York  corporation  were  subjected  to  the  transfer  tax, 

^  A.  R.  Comptroller,  1895,  p.  xix. 
»  Plummer  vs.  Coler,  178  U.  S.,  115. 
» 157  N.  Y.,  46. 
*  Matter  of  Hamilton,  148  N.  Y.,  310. 


495]  REVENUES  171 

thus  taxing  property  at  the  situs  of  the  property  itself.  A 
seat  in  the  New  York  Stock  Exchange  was  held  to  be 
properly  subject  to  the  tax.  The  stock  of  the  Boston  & 
Albany  and  Fitchburg  Railroads,  when  owned  by  a  non- 
resident, could  not  be  taxed  at  its  full  value  by  the  state 
for  the  reason  that  the  railroads  were  corporations  of  other 
states  beside  New  York,  and  all  their  property  could  not  be 
regarded  as  having  its  situs  here.^ 

These  cases  by  no  means  exhaust  those  on  the  subject, 
but  they  have  been  given  as  illustrations  to  show  what  were 
some  of  the  points  raised,  and  the  disposition  made  of  them. 
They  serve  to  make  clear  some  of  the  difficulties  in- 
volved in  the  administration  of  an  inheritance  tax  for  the 
states. 

Collection  of  the  Tax. — Every  administrator  of  an  estate 
was  required  to  pay  the  tax  to  the  county  treasurer.  The 
Surrogate  Court  was  given  jurisdiction  to  determine  all 
questions  in  relation  to  the  tax,  and  it  was  to  appoint  ap- 
praisers to  detennine  the  value  of  the  estate.  The  money 
was  to  be  paid  to  the  county  treasurers  and  transferred 
semi-annually  to  the  state  treasury. 

At  first  the  law  was  not  enforced  by  the  local  officers. 
"  Estates  were  settled  in  the  Surrogate  Courts  and  the  funds 
distributed  without  any  inquiry  being  made  as  to  whether 
there  was  a  tax  due  the  state  thereon.  The  tax  was  evaded 
and  violated  with  apparent  impunity."  ^  In  1892,  an  ex- 
amination of  the  records  and  proceedings  of  the  Surrogate 
Courts  was  instituted  for  the  purpose  of  discovering  estates 
that  were  liable  to  taxation,  but  which  had  thus  far  escaped. 
The  amount  received  as  a  direct  result  of  these  examina- 
tions was  more  than  the  expense  attending  the  collection  of 

» 186  N.  Y.,  220. 

*  A.  R.  Comptroller,  1893,  p.  23. 


1^2       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [496 

the  entire  inheritance  tax  for  that  year,  and  the  amount 
received  on  delinquent  estates  and  by  way  of  penalty  was 
greater  than  the  sum  expended  in  making  the  investigation. 

A  record  book  was  furnished  to  each  Surrogate,  in  which 
to  record  the  name,  date  of  death  of  each  decedent,  the 
names  and  addresses  of  the  executors,  the  estimated  value 
of  the  real  and  personal  property,  the  names,  places  of  resi- 
dence and  relationship  of  the  next  of  kin,  the  amount  of  the 
tax  assessed  by  the  Surrogate,  and  other  data.  On  the  ist 
of  January,  April,  July,  and  October  the  Surrogate  Courts 
are  required  to  make  reports  to  the  comptroller  and  the 
county  treasurers.  Similar  reports  are  required  of  the 
county  clerks,  of  all  deeds  and  other  conveyances  filed  or 
recorded  in  their  offices. 

The  expenses  of  the  appraisal  were  to  be  paid  by  the 
county  treasurers  out  of  the  proceeds  of  the  tax.  This  led 
to  great  abuses.  Appraisers  were  to  be  paid  $3  per  day,  but 
large  discrepancies  appeared  between  various  counties.  In 
some  cases  appraisers'  fees  amounted  to  50  per  cent  of  the 
tax  collected,  and  in  many  of  the  counties  the  appraisers' 
fees  were  more  than  the  entire  amount  collected.  Further- 
more, many  appraisals  were  grossly  in  error.  In  some  cases 
property  appraised  at  a  few  thousand  dollars  was  shortly 
afterwards  sold  for  nearly  a  million.  To  remedy  these 
evils  salaried  appraisers  were  appointed  by  the  comptroller 
in  fifteen  counties.  New  York  county  had  six,  Kings  three, 
and  the  other  thirteen  had  one  appraiser  each.  In  the 
counties  where  salaried  appraisers  were  not  appointed,  the 
county  treasurers  were  required  to  do  the  work  without  re- 
ceiving additional  fees.  This  resulted  in  a  decrease  of  cost 
to  the  state  from  $35  to  $5  per  estate,  thus  causing  a  saving 
of  over  $120,000.  In  twelve  counties  assistants  to  the 
Surrogate  Courts  were  appointed. 

In  sixteen  counties  payment  of  the  tax  was  now  made 


497]  REVENUES  173 

directly  to  the  state  comptroller,  thus  saving  the  fees  of 
comptrollers  and  county  treasurers.  In  the  forty-five 
counties  where  the  collection  was  made  by  the  county  treas- 
urer, he  received  as  compensation  five  per  cent  on  the  first 
$50,000,  two  and  one-half  per  cent  on  the  next  $50,000, 
and  one  per  cent  on  all  additional  sums.  These  fees  were 
in  addition  to  the  salaries  already  allowed  by  law.  The 
funds  were  to  be  paid  to  the  state  treasurer  on  the  first  of 
January,  April,  July  and  October,  and  if  not  paid  within 
thirty  days  of  these  dates  interest  was  charged  at  the  rate  of 
ten  per  cent.  A  receipt  is  always  given,  but  any  person 
can,  upon  the  payment  of  fifty  cents,  obtain  a  duplicate  re- 
ceipt either  from  the  county  treasurer  or  state  comptroller, 
showing  that  the  tax  has  been  paid. 

If  the  tax  is  paid  within  six  months  from  the  time  it  ac- 
crues, a  discount  of  five  per  cent  is  allowed,  but  if  not  paid 
within  eighteen  months,  except  where  litigation  results,  in- 
terest is  charged  at  the  rate  of  ten  per  cent  from  the  time  the 
tax  accrues.  Executors  or  administrators  receiving  the 
transferred  property  are  personally  liable  for  the  tax,  and 
every  executor  is  given  power  to  sell  so  much  of  the  prop- 
erty as  is  necessary  to  raise  the  amount  of  the  tax. 

In  1895,  the  comptroller  was  given  power,  with  the  ap- 
proval of  the  attorney-general  and  the  justice  of  the 
supreme  court,  to  settle  and  adjust  amounts  erroneously 
paid.  If  the  tax  remained  unpaid  for  eighteen  months,  pro- 
ceedings were  started  by  the  district  attorney  for  collecting 
the  same.  The  comptroller  could  demand  a  re-appraisal  of 
an  estate  which  he  believed  had  been  fraudulently  made  if 
application  was  made  within  two  years  after  the  entry  of 
the  order  by  the  surrogate.  The  comptroller  was  author- 
ized to  retain  counsel  to  represent  him  in  cases  where  he 
was  an  interested  party,  but  in  non-resident  cases  the  amount 
allowed  could  not  exceed  ten  per  cent  of  the  amount  col- 


174       FINANCIAL  HISTORY  OF  NEW  YORK  STATE     [^gg 

lected.  The  law  was  quite  effective  in  reaching  estates  of 
residents,  but  those  of  non-residents  were  a  source  of  dif- 
ficulty. In  1 901,  there  were  3,059  estates  taxed,  of  which 
368  were  non-residents'  estates.  Each  of  these  was  brought 
to  the  attention  of  the  department  by  attorneys  who  made  a 
specialty  of  this  work,  since,  while  it  was  not  worth  while 
for  an  attorney  to  ferret  out  estates  paying  less  than  $200, 
these  have  usually  escaped.  For  a  time  the  tax  was  evaded 
through  the  transfer  of  property  by  corporations ;  securities 
and  deposits  would  be  transferred  to  the  beneficiaries  with- 
out giving  the  comptroller's  representative  any  opportunity 
to  examine  the  assets.  Every  corporation  was  therefore 
required  to  give  the  comptroller  ten  days'  notice  of  the  time 
and  place  of  any  intended  delivery  of  property,  and  the 
comptroller  was  authorized  to  examine  the  assets  at  the 
time  of  the  transfer.  Corporations  were  made  responsible 
for  the  tax  in  case  of  failure  to  serve  this  notice,  or  to  allow 
such  examination,  and  in  addition  a  penalty  of  not  less  than 
$5,000  nor  more  than  $25,000  might  be  imposed. 

Every  device  which  cunning  lawyers  could  invent  was 
resorted  to  in  order  to  evade  the  tax.  A  favorite  method 
of  evading  the  tax  was  to  draw  up  a  will,  so  as  to  create 
indeterminate  remainders,  and  thus  to  render  it  impossible 
to  fix  the  tax  until  the  fulfilment  of  the  conditions  under 
which  the  trust  was  created.  During  the  three  years  prior 
to  1900,  the  payment  of  the  tax  on  $40,000,000  was  in- 
definitely postponed  by  the  creation  of  remainder  interests. 
To  meet  this  situation  the  law  was  changed  to  provide  for 
the  immediate  payment  of  the  tax  upon  all  estates  whether 
contingent  or  otherwise.  The  value  of  the  future  estate 
was  to  be  determined  by  the  superintendent  of  insurance, 
by  the  method  employed  in  computing  life-insurance 
policies,  except  that  the  rate  of  interest  in  making  these 
computations  was  fixed  at  five  per  cent.     Another  attempt 


499]  REVENUES  175 

at  evasion  was  the  contention  that  property  transferred  in 
accordance  with  wills  made  before  the  passage  of  the  trans- 
fer tax  law  was  not  taxable,  since  the  title  referred  back  to 
the  original  instrument  The  decision  of  the  court  was,  in 
effect,  that  all  estates  were  taxable  at  the  time  they  actually 
vested  in  possession  of  th'e  beneficiary,  without  regard  to 
whether  they  were  taxable  or  not  at  the  time  the  original 
will  was  made/ 

The  best  summary  of  the  arguments  for  the  inheritance 
tax  to  be  found  in  official  documents  is  that  contained  in  the 
Comptroller's  annual  report  for  1897.  While  the  value  of 
real  estate  increased  155  per  cent  from  1870  to  1895,  the 
assessed  value  of  personal  property  showed  a  gain  of  less 
than  50  per  cent  for  the  same  period,  although  since  1886 
the  sum  of  over  $2,000,000,000  had  been  invested  in  the 
capital  of  corporations.  This  furnished  striking  proof  that 
personal  property  was  escaping,  and  at  the  same  time  was  a 
justification  for  the  attempt  to  reach  this  property  in  other 
ways.  After  describing  the  various  special  privileges  which 
large  capitalistic  enterprises  enjoy,  such  as  a  protective 
tariff,  patent  rights,  and  privilege  of  incorporation,  he  con- 
cluded "  that  in  these  special  privileges  conferred  by  gov- 
ernment lie  the  foundation  of  most  of  the  great  fortunes 
of  the  country;  that  such  fortunes  call  for  greater  police, 
fire  and  other  protection  than  small  ones  .  .  .  that  it  is  im- 
possible to  make  them  pay  anything  like  their  fair  share  of 
tax  during  the  life  of  their  owner;  that  it  is  manifest  that 
from  two  and  a  half  to  three  billions  of  personal  property 
is  escaping  taxation  every  year,  and  that  it  is  respectfully 
submitted  .  .  .  if  it  would  not  be  wise  to  make  it  pay  an 
inheritance  tax  which  would  in  a  limited  degree  at  least 
compensate  for  the  great  benefits  it  has  received."  '    It  will 

1  163  N.  Y.,  597.  »  A.  R.  Comptroller,  1897,  p.  xxiii. 


1^6       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [500 

be  noticed  that  the  main  theories  presented  here  are  the 
back-tax  argument  and  the  argument  that  the  payment  is 
for  a  special  privilege  conferred  by  the  government. 

The  comptroller  recommended  a  progressive  tax,  which 
was  adopted  a  few  years  later.  The  law,  as  amended  in 
191 1,  exempted  the  sum  of  $5,000  transferred  to  direct 
heirs,  but  imposed  a  tax  of  one  per  cent  on  amounts  above 
$5,000.  The  tax  on  collateral  heirs  remained  five  per  cent, 
and  the  amounts  below  $1,000  are  exempted. 

The  following  table  shows  the  rate  of  the  tax  for  the  var- 
ious grades : 

Direct  Heirs  Collateral  Heirs 

$5,000  to     $50,000      I  per  cent  $1,000  to     $50,000      5  per  cent 

50,000  to     250,000      2  per  cent  50,000  to     250,000      6  per  cent 

250,000  to  1,000,000      3  per  cent  250,000  to  1,000,000      7  per  cent 

1,000,000  or  over           4  per  cent  1,000,000  or  over            8  per  cent 

Another  change  was  the  abolition  of  double  taxation  of 
inheritances.  Formerly  shares  in  New  York  corporations 
and  money  and  securities  deposited  in  New  York  were  tax- 
able there,  and  also  liable  in  some  cases  to  taxation  in  the 
state  of  which  the  decedent  was  a  resident.  Under  the  pres- 
ent law  estates  of  non-residents  are  taxable  on  real  estate 
and  on  such  tangible  property  as  household  goods  or  mer- 
chandise located  in  the  state.  Resident  decedents  are 
taxed  on  their  stocks,  money  and  securities  wherever 
located,  but  non-residents  are  not  taxed  on  such  property. 
The  law  follows  the  rule  that  such  property  has  its  situs  at 
the  residence  of  the  owner. 

The  amount  produced  by  the  tax  in  1887,  amounted  to 
$561,716,  and  the  comptroller  predicted  that  it  would  pro- 
duce $1,000,000  in  some  years.  This  prophecy  was  fulfilled 
two  years  later.  In  191 2,  the  net  receipts  of  the  tax  were 
$12,153,189,  collected  from  10,624  estates.    The  cost  of  col- 


50l]  REVENUES  1 77 

lection  has  been  reduced  from  12  per  cent  in  1889,  to  .0439 
per  cent  in  19 10,  but  the  cost  is  still  disproportionate  to  that 
of  collecting  other  state  taxes.  The  cost  of  collecting  the 
corporation  tax  is  .0036  per  cent;  that  of  the  stock  transfer 
tax  .0092  per  cent,  and  that  of  the  mortgage  tax  .0154  per 
cent.  About  55  per  cent  of  the  cost  of  collecting  the  in- 
heritance tax  consists  of  attorneys'  fees.  A  great  saving 
could  be  introduced  here  by  providing  for  salaried  ap- 
praisers in  the  forty-six  counties  where  the  county  treas- 
urers still  act  as  appraisers,  and  by  adding  to  the  comp- 
troller's office  a  salaried  legal  staff,  competent  to  deal  with 
appeals  and  questions  arising  daily  in  the  appraisal  of  the 
estates.  Upwards  of  three  thousand  unfinished  estates 
were  before  the  appraisers  in  New  York  County  alone  in 
1912.^ 

Liquor  Tax 

Prior  to  1896,  the  control  of  the  liquor  traffic  in  the  state 
rested  almost  entirely  with  the  local  license  boards.  In  that 
year  a  law  was  passed  providing  for  a  state  license  system, 
with  charges  based  upon  the  population  of  the  various  muni- 
cipalities. A  state  commissioner  of  excise  was  appointed 
by  the  governor  for  five  years.  Deputies  and  special  agents 
were  also  appointed  at  stated  salaries.  One-half  of  the  pro- 
ceeds of  the  tax  is  payable  to  the  state  and  the  remaining 
half  to  the  town  or  city. 

Seven  grades  of  licenses  were  granted,  and  the  amount 
of  the  license  depended  upon  the  character  of  the  business 
and  the  population  of  the  city  for  which  it  was  issued.  The 
first  grade  consisted  of  licenses  issued  to  those  places  where 
the  liquor  was  drunk  on  the  premises  where  it  was  sold; 
the  second  grade  included  establishments  where  it  was  sold 

^  A.  R.  Comptroller,  1913,  p.  xii. 


178       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [502 

in  quantities  of  less  than  five  gallons  and  not  drunk  where 
it  was  sold ;  the  third  grade  consisted  of  licenses  to  licensed 
pharmacists ;  the  fourth  grade  regulated  the  selling  of  liquor 
on  cars  and  steamboats;  the  fifth  grade  imposed  a  fee  of 
$1.50  for  each  vehicle  employed  by  a  brewery  in  delivering 
its  liquor;  and  the  sixth  and  seventh  grades  covered  the 
traffic  in  alcohol  and  wine  produced  by  fruit  growers. 

In  counties  and  boroughs  containing  dense  populations 
special  deputy  tax  commissioners  were  appointed  who  had 
charge  of  the  collection  of  the  tax.  In  other  counties  it  was 
collected  by  the  county  treasurers.  The  county  treasurer's 
fees  in  counties  containing  a  first  and  second-class  city  were 
one  per  cent  of  the  amount  collected ;  in  counties  containing 
a  third-class  city  only,  two  per  cent,  and  in  all  other  counties 
three  per  cent.  Before  a  license  was  issued  a  bond  had  to 
be  given.  Refunds  were  allowed  to  dealers  who  ceased 
business  before  the  expiration  of  their  licenses.  Local 
option  was  allowed  in  the  various  counties  which  determined 
whether  liquor  should  be  sold  under  the  provisions  of  the 
state  law  or  not.  The  state  license  system  proved  to  be  a 
great  financial  success.  Under  the  old  law  nearly  5,000 
officials  were  employed,  and  the  cost  of  collections  amounted 
to  eight  per  cent  of  the  gross  receipts.  Under  the  new 
system  only  160  men  were  employed,  and  the  cost  of  col- 
lection was  nine-tenths  of  one  per  cent.  In  many  cases  the 
amounts  which  the  counties  received  from  this  one  source 
exceeded  the  total  amount  of  taxes  which  they  paid  to  the 
state.  The  tax  is  the  third  largest  single  source  of  revenue 
in  the  state,  and  in  1912  yielded  $9,412,364. 

Racing  Tax 

In  1887,  an  annual  tax  of  five  per  cent  upon  the  gross 
receipts  for  admission  to  race  tracks  on  which  racing  was 
held  was  imposed.     The  provision  of  the  penal  code  pro- 


503]  REVENUES  179 

hibiting  the  selling  of  pools  was  suspended  for  thirty  days 
only  between  May  15th  and  October  15th.  This  act  did 
not  apply  to  county  or  town  agricultural  societies  or  fairs, 
but  only  to  those  incorporated  associations  which  had  for 
their  purpose  the  improvement  of  the  breed  of  horses.  The 
income  of  the  tax  was  to  be  distributed  in  the  form  of  prizes 
at  the  various  county  fairs  by  the  State  Agricultural  So- 
ciety. The  purpose  was  to  improve  the  breed  of  cattle, 
sheep  and  horses.  Every  association  was  required  to  report 
to  the  comptroller  the  amount  of  gross  receipts  on  or  before 
November  15th,  and  the  tax  was  due  between  December  ist 
and  15th. 

The  law  of  1899  provided  for  the  appointment  of  three 
state  racing  commissioners,  who  were  to  receive  no  com- 
pensation except  necessary  expenses  not  exceeding  $5,000. 
These  expenses  were  to  be  assessed  by  the  comptroller  upon 
the  various  racing  associations.  Three  supervisors  were 
appointed  by  the  governor  at  stated  salaries  to  ascertain  the 
gross  receipts  and  to  report  to  the  comptroller.  This  resulted 
in  a  marked  increase  in  the  revenue.  In  1888,  the  revenue 
was  only  $23,179,  whereas  in  1908  it  amounted  to  $247,443. 
In  191  o  the  tax  was  repealed.^ 

Stock  Transfer  Tax 

On  June  2d,  1905,  an  act  went  into  effect  taxing  all  trans- 
fers of  shares  of  stock  at  the  rate  of  two  cents  on  each  $100 
of  face  value  or  fraction  thereof.  The  original  law,  as 
amended  in  1906,  made  the  unit  of  taxation  one  share  of 
stock,  without  regard  to  its  face  value,  so  that  the  tax  on 
the  transfer  of  a  share  of  stock  worth  $10  was  the  same 
as  the  tax  on  a  share  worth  $100.     This  was  held  to  be 

*  Laws  of  1910,  chap.  489. 


l8o       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [304 

unconstitutional,  and  as  a  result  the  unit  of  taxation  was 
made  $100  face  value  or  fraction  thereof/ 

The  tax  was  to  be  paid  by  affixing  stamps  either  upon 
the  books  of  the  company  or  upon  the  memoranda  of  sales. 
The  penalty  for  failure  to  pay  the  tax  or  for  illegal  use 
of  stamps  was  a  fine  of  from  $500  to  $1,000  and 
imprisonment.  The  penalty  for  failure  to  cancel  the  stamp 
was  a  fine  of  $200  or  not  more  than  $500.  No  transfer  of 
stock  on  which  the  tax  was  not  paid  at  the  time  of  transfer 
could  be  made  the  basis  of  any  action  in  legal  proceedings. 

The  first  difficulty  arose  in  connection  with  the  stamps. 
They  were  washed  and  reused  in  a  wholesale  manner  and  it 
was  estimated  that  the  state  lost  from  $150,000  to  $200,000 
by  the  sale  and  fraudulent  use  of  void  stamps.  The  protec- 
tion of  the  completed  and  saleable  stamps  was  wholly  inade- 
quate. Conditions  made  it  necessary  to  establish  an  entirely 
new  system,  so  as  to  protect  the  state  in  the  printing  and 
sale  of  stamps,  and  the  character  of  the  stamps  was  changed 
so  as  to  render  them  less  susceptible  to  washing  and  reusing. 
A  considerable  traffic  grew  up  in  selling  canceled  stamps  for 
dishonest  purposes,  and  the  interest  of  these  stamp  dealers 
was  powerful  enough  to  prevent  the  passage  of  an  amend- 
ment, in  1910,  which  would  abolish  the  traffic.  But  in  191 1 
dealing  in  stamps  without  permit  from  the  comptroller  was 
prohibited.  Stamps  cannot  be  removed,  but  stamps  erron- 
eously affixed  will  be  accepted  in  payment  of  the  tax. 

In  November,  1907,  the  court  decided  that  the  original 
issue  of  stock  was  not  a  transfer  and  therefore  not  subject 
to  the  tax.  ^  As  a  result  of  this  decision  claims  for  refunds 
of  taxes  were  received,  and  as  the  comptroller  had  no  au- 
thority to  make  such  refunds,  the  law  was  amended  to  give 

*  People,  ex  rely  Farrington  v.  Mensching,  187  N.  Y,,  8. 

•  A.  R.  Comptroller,  igog,  p.  xxxvi. 


505]  REVENUES  181 

him  power  to  refund  taxes  erroneously  paid.  Claims  re- 
jected by  the  comptroller  could  be  filed  with  the  court  of 
claims. 

Brokerage  firms  are  required  to  keep  a  book  showing  all 
transaction  which  is  subject  to  the  inspection  of  the  comp- 
troller between  the  hours  of  10  a.  m.  and  3  p.  m.,  except 
upon  Saturdays,  Sundays  and  legal  holidays.  He  is  also 
allowed  to  examine  books  for  the  purpose  of  ascertaining 
whether  the  tax  has  been  paid  or  not 

In  1908,  five  additional  examiners  were  added  to  the  stock 
transfer  bureau,  and  the  number  was  subsequently  increased 
to  thirteen.  This  number  is,  however,  still  too  small  to 
accomplish  the  work  of  inspecting  the  80,000  corporations 
within  the  state.  The  system  of  "  balancing  and  paying  on 
differences  "  in  vogue  among  brokers  deprived  the  state  of 
a  vast  revenue.  The  tax  was  applicable  not  only  to  trans- 
actions occurring  on  the  exchanges,  but  also  to  transfers  of 
stocks  of  miscellaneous  corporations  not  dealt  in  on  the 
exchange.  These  can  only  be  reached  by  inspection  and  ex- 
amination, for  which  purpose  additional  examiners  are  nec- 
essary. 

The  tax  in  1905  yielded  $1,226,758,  and  in  19 12  it  yielded 
$3,653,037.    The  cost  of  collection  was  1.34  per  cent. 

Mortgage  Tax 

The  original  law  passed  in  1905  imposed  an  annual  tax 
on  every  recorded  mortgage.  This  was  in  operation  from 
July  1st,  1905,  to  June  30th,  1906.  On  July  ist,  1906,  the 
present  law  went  into  effect.  It  imposed  a  recording  tax  of 
fifty  cents  for  each  $100  of  the  principal  of  the  mortgage 
debt,  and  each  remaining  major  fraction.  The  amount  of 
money  collected,  less  the  expenses  of  collection  which  were 
audited  by  the  state  board  of  tax  commissioners,  was  di- 
vided equally  between  the  state  and  the  localities  in  which 
the  mortgaged  premises  were  located. 


l82        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [506 

Recording  officers  of  each  county  collected  the  money  and 
paid  it  over  monthly  to  the  county  treasurer,  who,  in  turn, 
made  quarterly  payments  to  the  state  treasury.  Annual  re- 
ports were  made  by  the  recording  officers  to  the  clerks  of 
the  board  of  supervisors  and  to  the  state  board  of  tax  com- 
missioners. The  board  of  supervisors  in  each  county  ap- 
portioned the  county's  share:  one-half  to  the  payment  of 
school  taxes,  and  one-half  to  general  county  expenses. 
Where  a  mortgage  covered  property  lying  in  two  or  more 
counties  or  partly  within  or  partly  outside  the  state,  the 
state  board  of  tax  commissioners  apportioned  the  amount 
of  tax  to  be  assessed  to  the  various  counties. 

In  the  case  of  trust  mortgages,  corporations  were  required 
to  make  certain  reports  to  the  state  board  of  tax  commis- 
sioners on  penalty  of  $100  fine  for  each  day's  delay  after 
the  time  specified  by  law.  No  mortgage  of  real  estate  can 
be  recorded  or  no  judgment  obtained  in  court  unless  this 
tax  has  been  paid.  No  mortgages  of  real  estate  situated 
within  the  state  are  exempt  by  reason  of  any  provision  in 
any  private  act  which  is  subject  to  amendment  by  the  legis- 
lature, or  by  reason  of  non-residence  or  for  any  other  cause. 
All  mortgages  of  real  estate  situated  within  the  state  are 
exempt  from  other  taxation,  either  state  or  local. 

The  state's  share  of  the  revenue  for  the  year  1906  was 
$431,323,  and  for  1912  it  was  $1,852,334,  of  which  $1,319.- 
190  was  received  from  the  city  of  New  York.  The  cost  of 
collection  amounted  to  1.64  per  cent. 

Secured  Debt  Tax 

This  law,  which  was  passed  in  191 1,  extends  the  idea  of 
the  mortgage-recording  tax  and  provides  a  low  fixed  tax  as 
a  substitute  for  the  unequal  personal  property  assessment 
of  securities.  Down  to  the  passage  of  this  act  the  debtor 
was  allowed  to  offset  his  debts  against  the  local  personal 


507]  REVENUES  183 

property  assessment.  It  represents  a  compromise  between 
those  who  believe  that  such  property  should  be  taxed  at  full 
local  rates  but  realized  that  most  of  it  now  escapes,  and 
those  who  advocate  entire  exemption.  The  law  permits  the 
owner  of  certain  securities  to  present  the  security  or  a  de- 
scription of  it  to  the  state  comptroller  and  upon  payment 
of  a  tax  of  one-half  of  one  per  cent  of  the  face  value  to 
secure  exemption  from  the  ordinary  assessment  as  personal 
property  at  the  local  tax  rate. 

The  secured  debts  that  come  under  the  law  are:  mort- 
gages on  real  estate  located  outside  the  state,  serial  bonds, 
notes  and  debentures  secured  by  such  mortgages,  or  by  any 
mortgages  not  subject  to  the  recording  tax  law,  bonds  of 
other  states  and  municipalities.  The  term  includes  all  bonds 
and  similar  securities  that  are  not  exempt,  and  that  do  not 
come  under  the  recording  tax,  but  ordinary  notes  are  not  in- 
cluded.^ The  amount  received  from  this  source  was  $1,- 
411,568  in  1912. 

*  Laws  of  1911,  chap.  802. 


CHAPTER  IX 
Expenditures 

Administrative. — The  most  important  item  of  expendi- 
ture during  the  early  years  was  that  for  the  administrative 
and  legislative  departments,  which  together  amounted  to 
more  than  one-fifth  of  the  total  ordinary  expenditures. 
From  the  very  beginning,  the  state  adopted  the  policy  of 
paying  stated  salaries  to  its  officials.  The  only  officers  pro- 
vided for  in  the  Constitution  of  1777  were  governor,  lieut- 
govemor,  chancellor,  justice  of  the  supreme  court  and 
treasurer.  The  governor  received  $3,000,  and  each  of  the 
other  officers  received  $1,250.  The  only  exception  to  this 
general  rule  was  found  in  the  cases  of  some  of  the  justices 
and  clerks  of  inferior  courts,  whose  salaries  came  out  of  the 
fees  collected.  Other  officers  were  added  from  time  to  time, 
such  as  the  auditor,  adjutant-general,  comptroller,  sur- 
veyor-general, and  attorney-general,  and  their  salaries 
were  fixed  by  law  in  the  annual  appropriation  bill.  The 
salaries  varied  slightly  from  year  to  year,  depending  upon 
the  attitude  of  the  legislators  whether  inclined  toward  ex- 
travagance or  economy,  but  up  to  1840  all  salaries  were  ex- 
ceedingly small,  as,  for  example,  in  that  year  the  governor 
received  $4,000,  the  comptroller  $2,500,  the  treasurer 
$1,500,  attorney-general  $1,000,  adjutant-general  $800, 
and  the  office  expenses  of  these  various  departments  varied 
from  $100  to  $500. 

The  constitution  of  1846  provided  for  a  superintendent 
of  public  instruction  and  a  state  engineer  and  surveyor. 
184  [508 


^O^]  EXPENDITURES  185 

All  salaries  were  exceedingly  small  down  to  the  year  1875, 
in  which  year  they  were  practically  doubled ;  all  officers  re- 
ceived $5,000  with  the  exception  of  the  governor,  comp- 
troller and  the  state  engineer,  who  received  $10,000,  $6,000 
and  $3,500  respectively.  The  salaries  at  the  present  time 
vary  between  the  limits  of  $5,000  to  $10,000.  The  attor- 
ney-general and  commissioner  of  education  each  receive 
$10,000.  The  comptroller  receives  $8,000,  and  the  treas- 
urer $6,000. 

The  salaries  of  the  governor  and  lieutenant-governor 
are  fixed  by  the  constitution.  The  salaries  of  the  other  offi- 
cers are  fixed  by  the  legislature.  In  November,  191 1,  an 
amendment,  submitted  to  the  people  to  increase  the  salary 
of  the  governor  from  $10,000  to  $20,000,  was  defeated. 

Legislative. — In  1789,  the  members  of  the  legislature  re- 
ceived 12  shillings  per  day  and  traveling  expenses  at  the 
rate  of  30  miles  per  day.  The  constitution  of  1821  pro- 
vided that  the  compensation  paid  should  not  exceed  $3.00 
per  day  (Section  9).  The  same  provison  was  retained  in 
the  constitution  of  1846,  which  provided  that  the  aggre- 
gate compensation  should  not  exceed  $300.00  and  $1.00  was 
allowed  for  every  10  miles  traveled.^ 

In  1874,  an  amendment  fixed  the  salary  at  $1,500  per 
year  and  $1.00  was  allowed  for  every  10  miles  travel.  This 
section  has  remained  unchanged  to  the  present  time.  In 
November,  191 1,  an  amendment  was  submitted  to  the  voters 
providing  for  an  increase  in  salary  from  $1,500  to  $3,500 
for  senators  and  to  $3,000  for  assemblymen,  but  it  was  re- 
jected. 

For  a  number  of  years  during  the  early  years  of  the 
state's  history  it  was  the  annual  practice  for  the  legislature 
to  include  a  section  in  the  annual  appropriation  bill,  giving 

*  Constitution,  1846.  art.  iii,  sec.  6. 


l86        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [310 

to  each  member  of  the  senate  and  assembly  $1.50  per  day 
for  each  day's  travel  and  attendance  in  addition  to  the  com- 
pensation already  allowed  them  by  law.  These  payments 
were  noted  on  the  comptroller's  books  as  an  "  additional  al- 
lowance to  the  legislature  "  and  amounted  to  from  one- 
fourth  to  one-fifth  of  their  regular  expenses.  In  1799,  the 
regular  allowance  was  $37,559,  and  the  additional  allow- 
ance amounted  to  $16,000.  No  doubt  the  limitation  of  the 
salaries  to  $3.00  per  day  by  the  constitution  of  1821  was 
designed  to  check  this  abuse. 

The  legislature  costs  the  state  annually  over  a  million  dol- 
lars, of  which  the  largest  item  is  for  the  compensation  of 
the  members  and  officers.  In  19 12,  there  was  paid  to  the 
senate  $236,303  and  to  the  assembly  $413,649.  The  con- 
tingent expenses  of  the  legislature  amounted  to  $186,344, 
which  included  the  expenses  of  joint  investigation  com- 
mittees, committees  attending  funerals  of  deceased  mem- 
bers, postage,  stationery,  expressage,  etc.  The  publishing 
of  official  notices  and  concurrent  resolutions  cost  $282,695. 

State  Printing 

The  increasing  number  of  state  departments  and  the 
growth  of  commissions  reporting  to  the  legislature  has 
increased  the  expenses  of  printing  enormously  in  recent 
years.  In  1880,  the  cost  was  only  about  $45,000,  by  1890 
it  had  trebled,  being  $140,159,  and  by  1912,  it  amounted 
to  over  one  million  dollars.  The  legislature  became  alarmed 
at  the  size  of  this  item  and  attempted  to  conceal  the  real 
situation  by  not  appropriating  enough  funds  to  pay  the 
debts  legally  incurred.  The  amount  of  the  appropriation 
for  printing  varied  with  the  generosity  of  the  financial  com- 
mittees and  bore  little  relation  to  the  actual  demands,  and 
as  a  result  new  appropriations  were  consumed  in  paying  old 
debts,  annual  deficits  occurred  and  contractors  were  forced 


2 1 1  ]  EXPENDITURES  1 87 

to  bear  the  burden  of  large  unpaid  accounts.  This  was  the 
situation  down  to  1902,  when  for  the  first  time  in  many 
years  there  was  not  a  single  unpaid  printing  bill. 

While  the  natural  growth  in  the  amount  of  printing  was 
the  main  cause  of  this  increasing  expenditure,  several  minor 
factors  contributed  to  augment  this  amount.  In  the  first 
place,  the  bids  for  doing  the  state  printing  were  practically 
non-competitive.  The  form  of  proposals  for  state  printing 
was  so  obscure  that  it  was  unintelligible  to  the  majority  of 
printers,  and  the  competition  was  thus  confined  to  a  few 
Albany  printers  who  had  had  experience  in  doing  the  work. 
In  the  second  place,  it  was  practically  impossible  to  audit 
the  bills  since  only  three  items  were  specified  in  the  bids, 
vis.,  pamphlets  and  book-work  blanks  and  circulars.  Sta- 
tionery was  not  specified.  Blanks  and  blank  books  varied 
in  size,  shape  and  quality,  so  that  it  was  impossible  to  make 
one  price  cover  the  various  items  of  work.  In  the  third 
place,  the  contract  for  legislative  printing  did  not  include 
the  printing  for  various  departments  and  many  departments 
called  for  additional  copies  not  specified  in  the  law.  Al- 
though the  law  specified  the  number  of  copies  allowed,  the 
practice  grew  up  of  ordering  additional  copies  by  means  of 
concurrent  resolutions,  but  no  appropriations  were  made 
to  pay  for  them. 

The  various  efforts  which  were  made  to  overcome  these 
evils  and  to  economize  are  worthy  of  notice. 

The  form  of  proposals  has  been  so  changed  as  to  make  it 
easily  intelligible,  and  the  proposals  for  bids  are  now  ad- 
vertised in  accordance  with  the  law.  Separate  bids  are 
now  asked  for  the  three  principal  contracts :  ( i )  the  print- 
ing of  the  bills  and  documents  presented  to  the  legislature; 
(2)  the  annual  edition  of  the  session  laws,  and  (3)  the 
blanks,  circulars  and  blank  books  for  the  various  depart- 
ments.   Separate  bids  are  now  received  for  blanks  of  differ- 


l88       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [512 

ent  sizes  and  for  various  items  of  work  and  the  stationery- 
used  in  the  various  departments  is  of  a  standard  grade. 

The  laws  governing  printing  have  been  revised  so  as  to 
include  all  the  state  printing  in  the  contracts  with  the  ex- 
ception of  such  printing  as  is  done  in  the  state  prisons  and 
charitable  institutions  and  the  bulletins  issued  by  Geneva 
and  Ithaca  experimental  stations.  The  large  amounts  paid 
for  engraving  and  lithographing,  led  to  a  law  requiring  that 
the  cost  of  illustrations  in  documentary  reports  be  borne  by 
the  departments  ordering  them. 

An  expert  printer  was  employed  to  examine  and  to  audit 
the  bills  for  printing.  A  state  printing  board,  consisting 
of  the  secretary  of  state,  comptroller,  and  attorney-gen- 
eral, was  established  in  1906,  which  has  control  and  super- 
vision over  all  printing  done  for  the  state.  An  experienced 
printer  is  in  charge  of  the  department  and  the  printing  of  all 
departments  passes  through  his  hands.  The  heads  of  de- 
partments and  commissions  now  have  an  expert  printer  at 
their  disposal  whom  they  can  consult  regarding  the  form  of 
their  reports.  The  department  keeps  in  touch  with  the 
work  in  its  various  stages  until  its  final  completion  and  de- 
livery. A  complete  record  is  kept  of  every  order  from  the 
time  it  is  received  by  the  printing  board  until  the  order  is 
completed,  and  both  the  departments  of  the  state  and  the 
state  printers  can  refer  to  these  files  to  see  if  the  specifica- 
tions are  being  complied  with.  Orders  not  filled  in  accord- 
ance with  the  contract  are  rejected.  The  result  is  that  better 
work  is  being  done  at  less  cost  than  ever  before.  Thou- 
sands of  dollars  have  been  saved  by  the  services  of  this  ex- 
pert printer.  For  example,  in  one  case  it  was  found  that  by 
cutting  down  the  length  of  a  book  one-eighth  of  an  inch 
there  would  result  a  saving  of  at  least  one-half  of  the  cost 
on  an  order  of  50,000  copies. 

On  the  first  of  May  the  printing  board  gives  notice  in 


513]  EXPENDITURES  1 89 

two  public  newspapers  of  different  political  faith  in  each  of 
the  cities  of  New  York,  Albany,  Troy,  Syracuse,  Rochester 
and  Buffalo,  that  they  will  receive  sealed  proposals  for  bids 
for  the  whole  of  the  legislative  printing  work  for  one  year. 
Before  the  contract  is  let,  an  investigation  is  made  as  to  the 
facilities  of  the  bidders  to  do  the  work.  The  legislative 
contract  is  let  for  one  year.  The  departmental  and  session 
law  contract  is  for  two  years. 

Judicial. — In  1798,  the  expenses  for  the  judiciary 
amounted  to  $7,596,  or  less  than  the  salary  of  one  supreme 
court  justice  at  the  present  time.  The  amount  grew,  until 
by  1842,  the  expenditures  for  the  judiciary  exceeded  that 
for  either  the  legislature  or  the  administrative  officers.  The 
constitution  of  1846  abolished  the  use  of  fees  or  perquisites 
of  office  by  judicial  officers,  except  justices  of  the  peace. ^ 

The  salaries  of  judicial  officers  are  at  present  fixed  by  the 
constitution.  The  justices  of  the  supreme  court  are  dis- 
tributed among  the  nine  judicial  districts  in  the  state  as 
follows:  1st  district  31,  2d  district  20,  3rd  district  5,  4th 
district  6,  5th  district  7,  6th  district  6,  7th  district  7,  8th  dis- 
trict 12,  9th  district  5.  The  salary  of  each  justice  is  $10,- 
000,  with  the  exception  of  the  five  justices  in  the  ninth  dis- 
trict and  four  justices  in  the  second  district,  who  receive 
$17,500.  The  legislature  may  alter  the  judicial  districts 
after  every  state  census,  or  it  may  increase  the  number  of 
justices  in  a  judicial  district  within  the  restriction  prescribed 
by  the  constitution.^  They  are  elected  by  the  people  for  a 
term  of  fourteen  years.® 

The  appellate  division  of  the  supreme  court  is  divided  into 
four  judicial  departments  for  the  state.     The  first  depart- 

*  Art.  vi,  sec.  21. 

^  Ibid.,  sec.  i,  Constitutiony  1894. 

3  Ibid.,  sec.  4. 


1 90       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [514 

ment,  which  consists  of  the  county  of  New  York,  has  seven 
justices  and  the  other  three  departments  each  have  five  jus- 
tices. Appointments  to  the  appellate  division  are  made  by 
the  governor  from  the  membership  of  the  supreme  court, 
for  a  term  of  five  years.  Justices  assigned  to  the  appellate 
divisions  in  the  third  and  fourth  departments  receive  the 
sum  of  $2,000  in  addition  to  their  regular  salaries,  and  the 
presiding  justices  receive  $2,500  additional  salary.  Those 
assigned  to  the  first  and  second  departments  receive  such 
additional  sums  as  are  now  paid  to  the  justices  of  these  de- 
partments. If  a  justice  elected  in  the  third  and  fourth  de- 
partments is  assigned  to  hold  a  term  in  another  judicial  de- 
partment, he  is  allowed  $10  per  day  for  expenses.^  The 
chief  judge  and  associate  judges  of  the  court  of  appeals  are 
elected  for  a  term  of  fourteen  years.  Each  judge  receives  a 
salary  of  $13,700,  except  the  chief  judge,  who  receives 
$14,200. 

The  clerk  of  the  court  of  appeals  and  the  clerks  of  the 
appellate  division  are  paid  out  of  the  state  treasury,  as 
also  are  the  law  librarian,  stenographers  and  the  confidential 
clerks  of  the  various  justices  and  judges.  The  expenses  of 
the  county,  surrogate  and  local  courts  are  a  charge  on  the 
various  counties. 

The  expenses  of  the  supreme  court  reporter,  state  re- 
porter, miscellaneous  reporters  and  the  board  of  claims  are 
included  under  the  general  term  judicial.  The  policy  of 
extending  relief  to  widows  and  families  of  deceased  public 
officials,  which  was  so  common  in  the  early  history  of  the 
state  is  still  in  vogue  to-day  in  the  case  of  widows  of  mem- 
bers of  the  judiciary.  In  191 2,  the  widows  of  Justice 
Spencer  and  Justice  Connan  received  $6,532  and  $9,722  re- 
spectively. 

»  Art  vi,  sec  12. 


515]  EXPENDITURES  19I 

The  total  expenditure  for  the  judiciary  amounted  to  $1,- 
757,922  in  1912,  of  which  amount  $1,200,000  was  paid  to 
the  120  justices  in  the  supreme  court  and  appellate  divisions. 

Regulative. — One  of  the  most  important  causes  of  the 
growing  expenditures  of  the  state  has  been  the  increasing 
number  of  new  offices  and  commissions  which  have  been 
created  since  1880.  Practically  the  only  commissions  which 
might  be  classed  as  regulative  in  1880  were  the  State  Board 
of  Health,  the  State  Assessors,  Commissioners  of  Quaran- 
tine, Superintendents  of  Weights  and  Measures  and  In- 
spector of  Gas  Meters.  The  Railroad  Commission  was 
created  in  1883.  The  Department  of  Labor  was  created  in 
1 901  by  consolidating  the  Bureau  of  Labor  Statistics, 
started  in  1883,  with  the  Board  of  Mediation  and  Arbitra- 
tion and  Factory  Inspectors,  started  in  1886.  The  State 
Assessors  were  supplanted  by  a  State  Board  of  Tax  Com- 
missioners in  1896.  A  Board  of  Port  Wardens  was  created 
in  1 89 1,  and  an  Inspector  of  Steam  Vessels  in  1897.  A 
Department  of  Excise  in  1896;  a  Metropolitan  Election 
District  Bureau  in  1898.  A  Weather  Bureau  existed  from 
1889  to  1899.  The  Public  Service  Commission  has  existed 
since  1907.  In  nearly  every  case  these  commissions  have 
been  created  to  exercise  supervision  and  control  over  private 
industry  or  business  in  the  interest  of  society  as  a  whole, 
and  it  is  in  this  field  that  we  see  most  clearly  the  changed 
attitude  of  the  state  toward  the  life  of  its  citizens.  Not 
only  every  class  of  society  is  being  brought  under  the  care 
and  supervision  of  the  state,  but  every  activity  of  every 
citizen  is  being  regulated  in  the  interests  of  all.  The  annual 
expenditures  for  this  purpose  have  increased  from  $238,798 
in  1881,  to  $2,331,806  in  1912. 

Public  Health. — The  early  expenditures  for  public  health 
were  of  two  kinds :  ( i )  an  annual  appropriation  to  the  hos- 
pital of  New  York,  and  (2)  appropriations  connected  with 


192        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [516 

the  organization  of  the  quarantine  service  at  New  York. 
The  hospital  received  $5,000  for  a  period  of  five  years, 
beginning  with  the  year  1792,  and  the  amount  was  gradu- 
ally increased  until  in  1830  it  amounted  to  $22,500. 

Beginning  in  1794,  the  governor  was  allowed  to  spend 
sums  not  exceeding  $2,500  for  the  purpose  of  preventing 
the  spread  of  contagious  diseases,  and  a  few  years  later 
quarantine  regulations  were  put  into  operation  on  all  vessels 
entering  the  port;  three  health  commissioners  were  ap- 
pointed; a  lazarette  was  built  and  a  detention  station  was 
erected  on  Bedloe's  Island  at  state  expense ;  a  tariff  schedule 
was  imposed  upon  all  captains,  mates,  passengers  and 
sailors  entering  the  city,  and  the  sums  collected  went  to  the 
support  of  sick  seamen  and  foreigners  in  the  quarantine 
station,  while  the  balance  went  to  the  Hospital  of  New  York. 
The  deficiencies  during  the  early  years  were  made  up  by  the 
state,  but  the  station  soon  became  self-supporting,  and  it 
was  only  in  exceptionally  bad  years  when  foreign  com- 
merce was  light  that  it  was  necessary  for  the  state  to  assist. 
For  a  time  these  health  commissioners  had  charge  of  the 
cleaning  of  the  streets  of  the  city,  although  even  then  the 
expense  was  borne  by  the  city,  but  in  1799  New  York  City 
was  given  the  power  of  draining  lots,  filling  up  marshes,  in- 
stalling a  sewerage  system.  Thus  occurred  the  transfer 
of  the  responsibility  for  the  health  of  the  city  from  state 
to  municipal  control. 

Down  to  the  establishment  of  the  Board  of  Health,  and 
later  the  creation  of  the  Health  Department,  all  health  regu- 
lation was  largely  in  the  hands  of  the  localities.  The  chief 
expenditures  made  by  the  state  were  for  quarantine  pur- 
poses connected  with  the  regulation  of  the  shipping  in  the 
port  of  New  York.  Even  at  the  present  time  the  expendi- 
tures for  this  important  service  bear  no  relation  to  the  im- 
portance of  the  service.    In  191 2,  only  $148,320  was  spent 


^17]  EXPENDITURES  I93 

by  the  health  department,  whereas  $114,853  was  spent  by 
the  agricultural  department  in  connection  with  a  study  of 
the  diseases  of  animals/ 

Educational. — The  subject  of  education  received  com- 
paratively little  attention  from  the  state  down  to  the  decade 
following  the  Civil  War,  and  the  expenditures  for  this  pur- 
pose were  exceedingly  small.  The  matter  was  left  largely 
to  private  initiative  and  the  local  subdivisions.  During  the 
years  1796- 182 5,  $13,301,000  was  spent  for  common 
schools,  of  which  amount  the  state  contributed  $960,000,  or 
about  one-fifteenth;  there  was  raised  locally  by  taxation  $3,- 
1 13,5*00,  or  one- fourth,  while  $9,227,500,  or  over  two- 
thirds,  was  given  by  individuals. 

The  office  of  Superintendent  of  Common  Schools  was 
created  in  18 12,  and  Gideon  Hawley  became  the  first  super- 
intendent. He  served  until  1821,  when  the  office  was  abol- 
ished and  the  duties  of  the  office  were  conferred  upon  the 
secretary  of  state.  In  1854,  the  office  of  Superintendent  of 
Public  Instruction  was  created,  to  exercise  supervision  over 
the  common  schools.  The  administration  of  the  higher  edu- 
cational institutions  was,  from  the  very  first,  entirely  dis- 
tinct from  that  of  the  common  schools,  being  vested  in  a 
Board  of  Regents  who  exercised  control  over  the  colleges 
and  academies.  In  1904,  all  the  educational  interests  of  the 
state  were  consolidated  under  a  Department  of  Education, 
which  was  placed  under  the  control  of  the  commissioner  of 
education  and  the  Board  of  Regents.  At  the  regular  meet- 
ings of  the  Board  of  Regents,  the  commissioner  of  educa- 
tion submits  statements  and  suggestions  concerning  the 
business  of  the  department,  and  action  by  the  board  is  taken 
upon  all  matters  involving  appointments  and  promotions, 
chartering  of  academies,  and  the  promulgation  of  rules  and 
regulations  governing  the  work  of  the  department. 

^  A.  R.  Comptroller,  1913,  p.  36. 


194       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [518 

The  first  expenditures  for  education  were  small  grants 
made  to  colleges  and  academies,  and  annual  appropriations 
made  to  the  counties  for  the  support  of  the  common  schools. 
In  1792,  $19,750  was  appropriated  to  Columbia  College, 
and  for  fourteen  years  $500  was  annually  appropriated  to 
the  Professor  of  Anatomy  in  Columbia  College.  Other  col- 
leges, such  as  Hamilton,  Union  and  numerous  smaller 
academies  received  annual  grants  from  the  treasury  and 
were  aided  by  lottery  grants.  The  first  expenditure  for 
common  schools  was  made  in  1795,  when  $50,000  was  ap- 
propriated. 

In  1805,  the  Common  School  Fund  was  established,  but 
the  first  payment  from  the  fund  was  not  made  until  18 16. 
From  this  time  on  the  legislature  made  annual  appropria- 
tions for  the  support  of  the  common  schools,  from  the  reve- 
nue of  this  fund,  and  whenever  the  revenue  from  the  fund 
was  less  than  the  amount  appropriated,  the  deficiency  was 
supplied  from  the  treasury.  After  the  establishment  of  the 
United  States  Deposit  Fund,  in  1837,  a  certain  portion  of 
the  revenue  of  this  fund  was  annually  transferred  to  the  in- 
come account  of  the  Common  School  Fund  and  apportioned 
to  the  school  districts.  Finally  an  annual  tax  was  levied 
for  the  support  of  schools,  and  this  together  with  the  in- 
come from  the  other  funds,  was  apportioned  by  the  superin- 
tendent to  the  school  districts  on  the  basis  of  school  term 
and  attendance  and  population  of  the  district. 

Another  fund  called  the  Literature  Fund  was  created  in 
1790,  and  the  income  of  this  fund,  together  with  an  amount 
transferred  from  the  revenue  of  the  United  States  Deposit 
Fund,  was  apportioned  by  the  Board  of  Regents  to  the 
academies  based  upon  the  number  of  pupils  from  the  sev- 
eral academies  who  passed  the  Regents'  examination. 

Special  funds  were  created  for  the  benefit  of  Cornell  Uni- 
versity and  Elmira  Female  College.     The  income  of  the 


519]  EXPENDITURES  I95 

College  Land  Scrip  Fund  and  The  Cornell  Endowment 
Fund  went  to  Cornell  University,  and  it  also  received  liberal 
appropriations  from  the  treasury.  The  income  from  the 
Elmira  Female  College  Educational  Fimd  went  to  Elmira 
College. 

The  expenditures  for  the  maintenance  of  common  schools 
have  increased  enormously  in  recent  years,  yet  the  propor- 
tion of  educational  expenditure  made  by  the  state  to  total 
expenditures  of  the  state  has  decreased  from  about  one- 
third  of  all  expenditures  in  1870  to  about  one- fourth  in 
191 2.  In  1850,  the  total  expenditure  for  education 
was  only  $1,607,688,  in  1880  it  was  ten  millions,  and  in 
19 12  nearly  84  millions.  Of  the  vast  sum  spent  in  191 2, 
only  $7,571,631  was  contributed  by  the  state,  the  remainder 
being  raised  locally. 

The  educational  expenditures  made  by  the  state  were  in- 
cluded under  so  many  different  appropriations,  and  the  in- 
terrelation between  funds  was  so  complicated  that  it  is 
difficult  to  give  a  clear  idea  of  the  confused  method  which 
was  in  operation  down  to  the  year  1904.  The  following 
table  has  been  prepared  to  show  the  purposes,  amounts 
paid  and  sources  of  the  educational  expenditures  for  1879 
which  is  a  typical  year : 

Purposes,  Amounts.                         Sources. 

Academies l44,o86.  Literature  Fund  &  U.  S.  Dep.  Fund. 

Instruction  of  Teachers 28,953.  U.  S.  Deposit  Fund. 

Common  School  Dividends  ....  245,600.  Com.  School  Fd.  &  U.  S.  Dep.  Fund. 

School  Comm'rs  Salaries 89,364.  Common  School  Fund. 

Indian  Schools 5,027.  Common  School  Fund. 

Cornell  University 31,600.  Col.  Land  Scrip  &  Cor'l  End't. 

State  Normal  Schools 43,863.  Annual  Appropriations. 

Elmira  Female  College 3,500,  Elmira  College  Fund. 

Common  Schools 2,927,327.  Taxation. 

Dept.  Public  Instruction 21,695.  Annual  Appropriations. 

State  Library 16,614.  Annual  Appropriations. 

Regents  of  the  University 10,719.  Annual  Appropriations. 

State  Museum  Natural  History. .  20,852.  Annual  Appropriations. 

Total J^3489,200. 


1^6       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [520 

This  method  of  making  educational  appropriations  was 
in  force  down  to  1904,  when  the  free  school  fund,  which 
consisted  of  the  state  tax  for  common  schools,  was  abol- 
ished and  the  income  from  the  various  school  funds  was 
transferred  directly  to  the  General  Fund.  Since  that  time 
the  support  of  common  schools  has  been  a  charge  on  the 
General  Fund  directly,  and  all  the  educational  expenditures 
are  now  included  under  one  heading  in  the  budget. 

The  total  expenditure  for  elementary,  secondary  and 
higher  institutions  in  the  state  was  $83,896,255  for  the 
year  1912.^  Of  this  amount  the  state  contributed  only  $7,- 
571,631  or  a  little  over  one-eleventh  of  the  total.  The  state's 
contribution  went  toward  the  support  of  common  schools, 
the  normal  schools,  the  department  of  education,  the  new 
education  buildings  and  high  schools  and  academies.  Of 
this  vast  sum  of  83  millions  there  was  expended  for  ele- 
mentary schools  $50,189,438,  for  public  high  schools  $9,- 
569,177,  for  academies  $4,000,603,  for  higher  institutions 
$17,927,943,  for  vocational  schools  $324,438,  and  the  bal- 
ance for  Indian  schools  and  evening  schools. 

The  $5,029,147  which  was  contributed  by  the  state 
toward  the  support  of  the  common  schools  was  apportioned 
on  the  basis  of  school  term,  attendance  and  population 
among  the  11,795  school  districts.  The  amounts  received 
varied  from  $100  to  $200  for  each  school  district,  but  all  of 
this  money  was  expended  for  teacher's  wages  with  the  ex- 
ception of  $72,800  spent  for  supervision  of  schools  and 
$26,686  spent  for  vocational  schools.  The  cost  of  main- 
taining the  eleven  normal  schools  was  $701,507  in  1912.  In 
addition  annual  appropriations  were  made  for  defraying 
the  expenses  of  teachers'  institutes  and  training  classes  and 
for  the  erection  of  new  buildings. 

^  A.  R.  Commission  of  Education,  1912,  p.  489. 


52 1  ]  EXPENDITURES  1 97 

In  July,  1908,  the  erection  of  the  education  building  was 
begun  at  Albany.  The  contract  price  was  $3,022,280/  The 
building  was  badly  needed  to  accommodate  the  Department 
of  Education  and  its  various  activities.  The  expenses  of 
construction  were  all  defrayed  by  annual  appropriations — a 
plan  which  the  state  still  adheres  to  in  the  construction  of 
hospitals,  normal  schools  and  prisons,  but  one  which  is  not 
sanctioned  by  a  sound  policy  of  public  finance. 

In  191 2,  there  were  718  high  schools  and  171  academies 
in  the  state  with  an  attendance  of  149,087  students.  The 
total  expenditures  for  these  schools  and  academies  amounted 
to  $12,160,225,  of  which  $669,489  was  contributed  by  the 
state.  The  state  money  was  spent  for  library  books  and 
apparatus,  for  tuition  of  non-resident  students,  for  attend- 
ance of  academic  students  and  per  quota  of  $100  to  each 
non-sectarian  secondary  school.  The  total  educational  ex- 
penditures amounted  to  one- fourth  the  total  state  budget. 

The  actual  results  obtained  from  this  vast  expenditure  of 
money  cannot  be  stated.  The  annual  reports  of  the  Com- 
missioner of  Education  do  not  give  the  cost  per  pupil  in 
the  various  kinds  of  schools  in  operation,  the  only  per  capita 
cost  data  being  for  supervising  districts  and  cities,  nor  is 
there  any  evidence  of  any  record  being  kept  of  the  pupils 
after  they  leave  school  to  determine  whether  the  learning 
acquired  has  fitted  them  for  the  duties  which  they  are  called 
upon  to  perform. 

While  the  number  of  children  of  school  age  has  not  in- 
creased rapidly  during  the  last  two  decades,  there  has  been 
a  remarkable  increase  in  the  number  of  teachers  employed, 
in  the  character  of  school  buildings  and  in  the  library  and 
laboratory  facilities.  During  the  two  decades  1892  to  19 12 
the  number  of  teachers  employed  increased  from  32,161  to 

^  A.  R.  Com.  of  Ed.,  1909,  p.  568. 


ig8       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [522 

46,906,  and  the  average  annual  salary  increased  from  $467 
to  $888.  The  amount  spent  for  libraries  increased  from 
$61,819  to  $306,419.  Visual  instruction  was  introduced  in 
1886,  and  200,000  slides  are  used  in  the  school  system. 

Every  effort  is  being  made  to  reach  all  children  of  the 
state.  Compulsory  education  has  been  in  force  since  1874, 
and  originally  applied  to  all  children  between  the  ages  of 
8  and  14.  Under  the  recent  amendment  the  school  age  is 
now  8  to  16  for  the  rural  districts  and  the  term  from  Oc- 
tober ist  to  June.  In  cities  having  a  population  of  over 
5,000  the  school  age  is  from  7  to  16,  and  the  term  the  whole 
time  the  public  schools  are  in  session.  The  total  number  of 
children  of  school  age  in  the  state  in  19 12  was  2,143,580, 
and  the  average  daily  attendance  was  1,164,992.  In  twenty- 
eight  cities  of  the  state  evening  schools  were  maintained  in 
19 1 2,  and  out  of  an  attendance  of  163,031,  there  were 
6,535  pupils  over  eight  and  under  sixteen  years  of  age, 
showing  the  largest  percent  of  the  attendance  was  wholly 
voluntary. 

Prison  schools  are  also  being  conducted  and  state  truant 
schools  are  needed  to  care  for  the  truants.  A  study  of  the 
inmates  of  the  reformatories  reveals  the  fact  that  "  in  al- 
most every  instance  the  boy  was  first  a  truant  and  next  a 
criminal."  ^  About  500  school  districts  do  not  maintain 
home  schools  but  provide  funds  for  the  education  of  their 
children  under  a  contract  system,  whereby  the  district  pays 
the  expenses  of  transportation  of  pupils  and  their  tuition  in 
a  neighboring  school. 

Agricultural 

The  expenditures  for  agricultural  purposes  did  not  as- 
sume importance  until  after  the  establishment  of  the  De- 

^  A.  R.  Com.  Ed.,  1909,  p.  27. 


^23]  EXPENDITURES  199 

partment  of  Agriculture  in  1884,  although  a  few  attempts 
were  made  in  the  earlier  years  to  improve  the  agriculture  of 
the  state  by  appropriating  small  sums  which  were  to  be 
used  as  prizes  or  to  defray  the  expenses  of  the  State  Board 
of  Agriculture.  The  first  state  agricultural  board  was 
created  in  18 19  and  existed  for  seven  years.  Several  thou- 
sand dollars  were  annually  appropriated  during  the  six 
years  following  18 19  for  prizes  offered  to  stimulate  agri- 
culture and  $1,000  went  to  defray  the  current  expenses  of 
the  board.  This  board  became  extinct  in  1826  and  no  state 
organization  existed  until  the  year  1841,  when  the  New 
York  State  Society  of  Agriculture  was  incorporated  and 
$8,000  was  annually  appropriated  for  five  years.  Of  this 
amount  $1,000  was  to  go  to  the  state  society  and  the  re- 
maining $7,000  was  to  be  appropriated  to  the  county  agricul- 
tural societies.  From  this  time  down  to  the  Civil  War 
period  annual  fairs  were  held  to  which  the  citizens  were  in- 
vited to  compete  for  prizes.  The  first  fair  was  held  at 
Syracuse  in  1841  and  from  10,000  to  15,000  spectators 
were  present  on  this  occasion.^ 

During  the  sixties  and  seventies  appropriations  continued 
to  be  made  to  the  agricultural  societies  and  occasionally 
additional  appropriations  were  made  for  special  purposes, 
as,  for  example,  a  commission  existed  from  1870  to  1873 
to  study  the  rinderpest.  The  first  appropriation  made  for 
an  agricultural  experiment  station  was  made  in  188 1.  A 
Dairy  Commission  was  started  in  1884  and  also  a  Depart- 
ment of  Agriculture  was  created.  State  aid  was  given  to 
Cornell  University  Experiment  Station  in  1895  and  to  the 
State  Veterinary  College  in  1896.  The  State  Fair  Commis- 
sion was  created  in  1900.  Appropriations  are  also  made 
to  St.  Lawrence  and  Alfred  Universities,  to  the  Morrisville 

*  Trans,  of  State  Agric.  Society,  vol.  23. 


200       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [524 

School  of  Agriculture,  and  distributions  are  still  made  to 
the  various  county  agricultural  societies  for  the  promotion 
of  agriculture.  The  total  expenditure  in  1912  was  $2,055,- 
338,  which  was  one  twenty-fifth  of  the  total  expenditures. 
Expenditures  for  agricultural  purposes  are  increasing 
rapidly.  During  the  decade  ending  191 2  they  increased  at 
the  rate  of  180  per  cent. 

Defensive 

The  expenditures  for  military  affairs  must  necessarily  be 
of  a  fluctuating  character.  The  policy  of  the  state  has  been 
to  pay  the  expenses  of  carrying  on  a  war  out  of  the  treasury. 
In  1898,  the  policy  was  slightly  modified  when  $900,000  of 
public  defense  bonds  were  issued  to  provide  funds  for 
carrying  on  the  Spanish- American  War. 

The  first  period  of  large  expenditures  was  occasioned  by 
the  organization  and  equipment  of  the  state  forces  during 
the  years  1794-5. 

War  of  18 12. — The  second  period  of  large  expenditures 
was  occasioned  by  the  War  of  18 12. 

Strained  relations  existed  for  several  years  previous  to 
the  declaration  of  war,  and  the  state  began  as  early  as  1809 
to  put  her  fortifications  in  defensive  order.  On  the  day 
that  war  was  declared  (June  12,  1812),  the  legislature 
passed  a  law  stating  the  maximum  amounts  which  might  be 
spent  by  the  various  officials  in  defense  of  the  state.  The 
commissary  of  military  stores  was  to  be  allowed  to  spend 
$25,000  in  camp  equipment  and  $50,000  upon  muskets  and 
ammunition,  while  the  governor  was  given  authority  to 
spend  $50,000  as  necessity  might  require,  and  $45,000  was 
appropriated  for  fortifications.  Even  these  liberal  pro- 
visions were  not  sufficient,  and  we  find  that  in  18 14  the 
governor  had  spent  more  than  the  maximum  sum  allowed 
by  law.    The  state  generously  came  to  the  aid  of  the  gov- 


^25]  EXPENDITURES  20I 

emor  by  authorizing  the  comptroller  to  audit  his  accounts 
and  pay  to  him  the  amounts  spent  in  excess  of  the  appro- 
priation upon  the  presentation  of  satisfactory  vouchers. 
The  same  year  $35,000  was  spent  upon  frontier  defenses 
and  $50,000  upon  the  fortifications  of  Staten  Island. 

Throughout  the  war  the  state  resorted  to  her  treasury 
for  money  for  the  general  defense  and  when  this  was  de- 
pleted she  borrowed  money.  This  method  resulted  in  scat- 
tering the  items  all  through  the  treasurer's  reports  in  such 
a  way  that  the  exact  sums  spent  could  not  be  identified,  and 
when  the  final  settlement  of  accounts  with  the  United  States 
came  to  be  made,  resort  was  had  to  the  files  of  the  depart- 
ment at  Washington.  The  investigation  which  was  made 
by  the  comptroller  showed  that  during  the  war  the  state 
spent  for  the  use  and  benefit  of  the  United  States  $139,- 
124.62.  This  amount  was  refunded  to  the  state,  together 
with  $40,264.86,  which  was  allowed  for  interest.  Under 
the  act  of  Congress,  authorizing  payment  for  property  lost, 
captured  or  destroyed  during  the  war,  the  state  secured 
$29,934.01,  on  account  of  the  destruction  of  property  along 
the  Niagara  frontier,  and  since  she  had  already  compen- 
sated the  real  sufferers,  this  amount  was  turned  into  the 
treasury.  The  final  payments  were  made  by  the  United 
States  in  1826. 

Of  the  four  direct  taxes  levied  by  the  United  States  upon 
the  state  the  last  two,  vi^.,  those  of  181 5  and  1816  were 
assumed  by  the  state  and  paid  out  of  her  treasury.  The 
first  two  levies  were  apportioned  to  the  several  counties  of 
the  state  and  these  were  not  fully  paid  until  many  years 
later.  In  1822,  an  assembly  committee  investigating  the 
arrears  of  taxes  found  that  of  the  first  United  States  direct 
tax  of  1798,  $2,024  of  principal  and  $4,129  of  interest  re- 
mained unpaid;  of  the  second  direct  tax  of  1814,  $6,112  of 
principal  and  $5,165  of  interest  were  tmpaid. 


202        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [526 

New  York's  quota  of  these  direct  taxes  is  given  in  the 
following  table : 

Year  Amount 

1798  $181,680.70 

1814  430,141.62 

1815  860,283.24  Assumed  by  state 

1816  430,141.62  Assumed  by  state 

Civil  War. — The  first  call  for  troops  on  April  15,  1861, 
was  for  75,000  men,  of  which  number  New  York's  quota 
was  15,280.  She  responded  with  13,906.  The  next  call 
for  500,000  men  came  on  May  3rd,  and  New  York  re- 
sponded with  120,231,  exceeding  her  quota  by  11,000  men. 

On  April  16,  1861,  $3,000,000  was  appropriated  for  the 
purpose  of  carrying  on  the  war.  During  the  years  1862  to 
1864  the  state  offered  bounties  to  secure  enlisted  men  and 
appropriated  $9,076,373  for  this  purpose.  During  the 
course  of  the  war  the  state  is  credited  with  having  furnished 
448,850  men,  about  half  the  male  population  between  the 
ages  of  18  and  45,  and  with  having  spent  over  $14,000,000 
from  her  own  funds.  The  principal  payments  on  account 
of  the  war  are  given  in  the  following  table : 

Purpose  Amount 

Act  of  April  16,  1861  $3,000,000 

For  bounties,  1862  to  1864  9,076,373 

Arms  and  equipment  for  state  troops 841,197 

Militia,  National  Guard   553,9^4 

Sick  and  wounded  soldiers 182,285 

Harbor  and  frontier  defense 4,979 

Bureau  of  Military  Statistics 20,403 

Claims  of  state  troops  183,134 

Adjutant  general's  muster  roll 6,282 

Volunteer  militia  84,506 

United  States  direct  tax  400,000 

Total  $14,353,083 


227]  EXPENDITURES  203 

The  first  call  from  the  national  government  for  funds 
was  made  in  1861,  when  Congress  levied  a  direct  tax  of 
$20,000,000  upon  the  states.  New  York's  quota  was  $2,- 
609,918.  The  state  paid  this  tax  out  of  its  treasury,  receiv- 
a  rebate  of  15  per  cent,  and  paid  over  to  the  United  States 
$2,213,333.  In  July,  1862,  New  York's  claims  against  the 
United  States  for  sums  spent  in  organizing  and  equipping 
volunteers  amounted  to  $2,948,964.  Very  tardy  progress 
was  made  in  the  settlement  of  the  accounts  between  the 
state  and  the  United  States,  and  in  1868  the  accounts  were 
still  unsettled.    The  account  in  that  year  was  as  follows :  ^ 

New  York  State,  Dr. 

To  direct  tax  of  1861  less  15  per  cent $2,213,331 

To  cash,  December,  1861   1,1 13,000 

To  cash,  October,  1865 262,763 

Total    $3,589,094 

New  York  State,  Cr. 

By  claims  as  presented  $2,948,964 

By  cash,  June,  1862 400,000 

$3,348,964 
Balance  due  United  States,  $240,130. 

Other  claims  against  the  United  States  to  the  amount  of 
$281,846  were  also  awaiting  settlement.  The  final  settle- 
ment was  tardily  made.  In  1873,  the  United  States  paid 
over  $300,148,  and  in  1877  and  in  1878  it  paid  $98,186 
and  $82,737  respectively. 

A  far  more  important  cost  of  the  war  was  the  amount 
spent  by  the  villages,  counties  and  towns  of  the  state.  An 
investigation  made  by  the  chief  of  the  bureau  of  military 
records  in  1868  showed  the  following  result:  47  counties 
had  spent  $58,000,000,  771  towns  had  spent  $32,000,000, 

^  A.  R.  Comp.,  1868,  p.  27. 


204       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [528 

and  535  towns  $1,700,000.  The  incomplete  reports  from 
five  cities,  twelve  counties  and  132  towns  showed  a  total  of 
over  $21,000,000.  If  we  add  to  these  sums  the  $14,000,000 
appropriated  by  the  state  and  the  bounty  debt  contracted  in 
1865  to  repay  the  towns  and  counties  for  bounties  paid  by 
them,  we  have  a  total  cost  of  over  $150,000,000.^ 

It  was  the  offering  of  large  local  bounties  which  secured 
the  volunteers.  The  different  cities  and  counties  competing 
with  each  other  succeeded  in  raising  the  bounties  to  high 
figures.  The  object  of  the  bounty  debt  was  to  repay  the 
towns  and  counties  and  to  prevent  the  necessity  of  their 
creating  large  local  debts.  Thirty  millions  were  appro- 
priated for  this  purpose,  and  the  amount  actually  expended 
was  $25,729,243.  The  maximum  bounty  for  three  years' 
service  was  fixed  at  $600,  for  two  years'  service  $400,  and 
for  one  year's  service  $300. 

The  comptroller,  writing  at  the  close  of  the  war,  says: 
"  Never  before  have  such  lavish  appropriations  by  legisla- 
tures and  such  extravagant  expenditure  in  private  life  been 
known  as  during  the  continuance  of  this  desolating  and  ex- 
hausting struggle  for  national  life."  ^ 

War  with  Spain. — The  war  with  Spain  was  financed  by 
increasing  the  annual  appropriations  for  defensive  purposes 
and  by  issuing  short-term  bonds.  In  1897,  the  expenditures 
for  defensive  purposes  were  $860,000,  but  they  rose  to  $1,- 
629,000  for  the  year  1898,  and  continued  to  exceed  a  mil- 
lion dollars  during  both  1899  and  1900.  The  $900,000  of 
public-defense  bonds  issued  to  carry  on  the  war  were  all 
paid  off  by  1906. 

The  United  States  has  been  tardy  in  reimbursing  the  state 
for  equipment  and  supplies  furnished  during  the  war.     In 

»  N.  Y.  in  the  War  of  the  Rebellion,  Phisterer,  1890. 
•  A.  R.  Comptroller,  1865,  p.  i. 


^29]  EXPENDITURES  205 

19 10  the  state  received  $49,542  from  the  United  States  for 
ordnance  furnished  troops  for  use  in  the  war  with  Spain. 

Penal  Institutions 

The  first  state  prison  was  erected  in  New  York  City  in 
1796  at  a  total  cost  of  $253,000.  This  was  sold  to  the 
city  in  1828  for  $101,000.  Auburn  prison  was  begun  in 
18 1 6  by  an  appropriation  of  $20,000  and  large  sums  ap- 
propriated during  the  next  live  years  brought  the  total 
cost  up  to  $281,843.  Sing  Sing  prison  was  opened  in  1825. 
The  Mount  Pleasant  prison  was  begun  in  1825,  but  this 
prison  was  subsequently  disposed  of  by  the  state.  In  1845 
the  Clinton  prison  was  opened.  The  female  department  of 
Auburn  prison  was  opened  in  1859,  but  was  used  as  an 
asylum  for  insane  criminals  prior  to  the  opening  of  the 
Matteawan  State  Hospital  in  1892.  The  Dannemora  State 
Hospital  for  insane  criminals  was  opened  in  1900.  The 
latest  addition  to  the  list  of  prisons  is  the  Great  Meadow 
prison  which  has  just  been  opened  at  Comstock,  N.  Y.  The 
newest  development  is  the  maintenance  of  a  State  Farm  for 
Women  at  Valatie.  A  new  prison  commission  has  been 
in  existence  since  1906,  charged  with  the  selection  of  a 
suitable  site  for  a  new  prison.  Both  the  original  site  se- 
lected at  Bear  Mountain  and  at  Wingdale  have  been  given 
up  and  the  proposition  abandoned.  In  19 10,  the  state  had 
expended  $7,303,709  for  building,  equipping  and  furnish- 
ing the  state  prisons,  all  of  which  had  been  appropriated 
out  of  the  annual  receipts.^ 

Manufacturing  plants  were  installed  in  the  prisons  ^t  an 
early  period,  but  for  many  years  they  failed  to  be  self-sup- 
porting. The  system  of  managing  prisons  under  state  in- 
spectors, as  provided  for  in  the  Constitution  of  1846,  was 
neither  efficient  nor  economical. 

*  A.  R.  Comptroller,  191 1,  p.  240. 


2o6       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [530 

No  rigid  inspection  of  accounts  was  made.  Bills  were 
paid  without  taking  receipts,  and  debts  were  contracted 
without  keeping  any  accounts  of  the  amounts.  The  agents 
reported  annually  to  the  comptroller  the  total  amount  of 
receipts  and  expenditures,  but  these  were  not  included  in  his 
annual  statement  of  receipts  and  expenditures,  being  at- 
tached to  the  report  as  appendices  up  to  the  year  1854. 
In  185 1  Auburn  prison  was  self-supporting,  but  Clinton  and 
Sing  Sing  prison  received  $13,500  and  $12,000  respectively 
from  the  treasurer.  The  inspectors  made  improper  uses 
of  the  earnings  of  the  convicts,  either  withholding  the 
money  altogether  or  expending  it  in  buildings  and  fixtures 
to  suit  their  fancy.  An  investigation  into  the  prison  man- 
agement in  1853  revealed  the  fact  that  a  large  debt,  amount- 
ing to  $221,386  had  accumulated  against  the  state.^  This 
was  paid  in  1854,  and  the  accounts  were  placed  under  the 
supervision  of  the  comptroller,  and  hereafter  the  agents 
were  required  to  render  monthly  accounts  of  receipts  and 
expenditures  to  the  comptroller. 

In  1876  the  office  of  inspector  of  prisons  was  abolished 
and  a  superintendent  of  prisons  was  appointed  who  had 
general  supervision  over  all  the  state  prisons.  The  superin- 
tendent was  forbidden  to  make  any  contract  to  let  out  the 
labor  of  the  prisoners  to  any  person  or  corporation,  and 
their  labor  was  to  be  directed  as  far  as  possible  toward  the 
production  of  articles  which  could  be  used  in  the  public 
institutions  of  the  state. 

The  excess  of  advances  from  the  treasury  over  receipts 
from  earnings  was  for  the  decade  1870  to  1879  about  $450,- 
000  a  year.^  Excluding  payments  made  for  improvements 
and  for  transportation  of  convicts,  the  three  prisons,  Clin- 

*  A.  R.  Comptroller,  1856,  p.  59. 
^Ihid.,  1879,  p.  16. 


53 1  ]  EXPENDITURES  207 

ton,  Auburn  and  Sing  Sing,  showed  a  deficit  of  only  $18,- 
533  in  1879.  Thus  for  the  first  time  in  their  history  they 
were  practically  self-supporting. 

The  contract  system  of  supplying  prison  labor  was  abol- 
ished by  constitutional  provision  in  1894/ 

Since  1885  large  sums  have  been  spent  for  manufactur- 
ing purposes,  yet  no  statement  showing  the  financial  con- 
dition of  the  manufacturing  departments  of  the  prisons  was 
made  to  the  comptroller  prior  to  1889  (chap.  382).  Since 
that  time  the  annual  report  contains  a  statement  of  the  value 
of  the  plants  and  machinery,  value  and  amount  of  manu- 
factured goods  unsold,  and  amount  of  goods  sold  and  not 
paid  for.  The  total  resources  of  all  prisons  amounted  to 
$1,250,340  in  1912. 

A  prison  capital  fund  is  maintained.  The  receipts  arise 
from  the  sale  of  manufactured  articles  and  the  expenditures 
are  for  the  maintenance  and  support  of  the  industries.  An- 
other fund,  called  the  Convicts'  Deposit  and  Miscellaneous 
Earnings  Fund,  is  maintained  and  amounted  to  $46,518  in 
1912. 

The  comptroller  can  withdraw  money  from  the  prison 
capital  fund  and  pay  Jt  into  the  treasury  whenever  there 
is  an  excess  of  the  amount  needed  to  meet  the  expenses  of 
the  prisons.  In  19 12  there  was  withdrawn  $100,000.  The 
net  earnings  of  all  prisons  amounted  to  $187,443  for  the 
year  ending  September  30,  191 2. 

The  principal  articles  manufactured  are  cloth,  knitting 
and  hosiery,  school  furniture,  carts  and  wagons,  cabinets, 
willow  ware,  brooms,  chairs,  saddlery  and  harnesses,  brush 
fiber  and  clothing.  The  general  plan  is  to  confine  the  manu- 
facturing industries  to  the  production  of  those  articles 
which  can  be  used  by  other  state  institutions,  such  as  the 

^  Art.  3,  sec.  29. 


2o8       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [532 

charitable  and  curative  institutions,  and  thus  obviate  the 
objection  which  has  often  been  raised  of  throwing  prison- 
made  products  on  the  market  at  a  lower  price  than  similar 
articles  can  be  produced  by  private  companies  who  have  to 
pay  wages  to  their  employees. 

The  Superintendent  of  State  Prisons  appoints  the  agents, 
wardens,  physicians  and  chaplains,  and  the  agents  and  war- 
dens appoint  all  other  officers,  subject  to.  the  approval  of 
the  superintendent.  The  clerks  of  the  prisons  are  appointed 
by  the  comptroller;  this  is  done  to  give  the  comptroller 
greater  control  over  the  financial  operations  of  the  prisons. 
The  constitution  of  1894  provides  for  a  State  Commission 
of  Prisons,  which  visits  and  inspects  all  penal  institutions 
and  exercises  a  supervisory  control  over  prison  affairs. 

A  Commission  on  Probation  has  existed  since  1907; 
it  has  supervision  over  the  work  of  probation  officers 
and  works  to  extend  the  application  of  the  probation  sys- 
tem. In  thirteen  cities  and  fourteen  counties  appropriations 
had  been  made  on  December  31,  19 10,  for  the  employment 
of  probation  officers  and  11,384  persons  were  under  pro- 
bationary oversight.  The  aim  is  to  allow  children,  and  in 
some  cases,  first  offenders  to  escape  confinement  in  prisons 
and  allow  them  to  be  free,  subject  to  the  supervision  of  pro- 
bation officers.  In  line  with  this  work  are  the  state  farms 
for  tramps  and  vagrants  and  for  women,  which  have  in 
view  the  prevention  of  crime  and  the  formation  of  crimi- 
nals by  furnishing  a  separate  place  for  the  care  of  these 
shiftless  and  irresponsible  classes. 

The  expenditures  in  19 12  for  all  penal  purposes  were 
$1,572,125. 

Charitable  Institutions 

During  the  early  years  the  state  undertook  no  systematic 
program  of  caring  for  the  poor  and  unfortunate;  no  state 


^33]  EXPENDITURES  209 

charitable  institutions  were  established  and  it  limited  its 
activities  to  making  small  grants  to  existing  private  institu- 
tions. About  1794  large  numbers  of  refugees  from  St. 
Domingo  began  to  come  to  this  country  to  escape  the  terrors 
of  the  struggle  which  was  then  being  waged  between  Na- 
poleon and  the  rebel  negro  leader,  Toussaint  L'Overture, 
and  for  a  number  of  years  the  state  contributed  small  sums 
to  relieve  the  sufferings  of  these  refugees.  Small  annual 
contributions  were  also  made  to  an  Economical  School  in 
New  York  City,  to  an  orphan  asylum,  to  an  eye  infirmary 
and  to  a  deaf  and  dumb  asylum.  The  largest  sums  went 
for  the  relief  of  the  foreign  poor  in  New  York  City;  in 
1798  one-third  of  the  duties  collected  upon  goods  sold  at 
auction  was  set  apart  for  this  purpose  and  additional  ap- 
propriations were  made  annually.  The  poor  were  a  charge 
upon  the  cities,  towns  and  counties,  and  large  sums  were 
collected  by  taxes  locally  for  this  purpose,  as,  for  example, 
in  1823,  there  were  356  paupers  in  the  state,  or  one  pauper 
for  every  220  inhabitants,  and  the  sum  raised  for  their  sup- 
port amounted  to  $223,974.  Such  was  the  small  beginning 
of  one  of  the  largest  items  in  the  budget  of  the  present  day. 
The  question  of  state  appropriations  of  money  for  the 
care  of  the  defective  and  delinquent  classes  began  to  claim 
attention  about  1840.  Up  to  this  time  these  duties  had 
been  left  to  local  authorities,  to  private  individuals  or 
private  institutions.  The  county  poor  house  had  long  ex- 
isted, but  the  increasing  number  of  insane  persons  presented 
a  problem  with  which  the  coimties  were  unable  to  deal.  In 
1854  the  governor  wrote,  "  While  any  of  our  unfortunate 
insane  remain  unprovided  for,  it  is  obvious  that  the  state 
has  not  performed  her  whole  duty  toward  her  suffering 
children."  ^ 

*  Governor's  Message,  1854,  p.  10. 


2IO       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [534 

The  Western  House  of  Refuge  for  Juvenile  Delinquents 
was  established  at  Rochester  in  1846,  and  the  State  Institu- 
tion for  the  Blind  at  Batavia  in  185 1. 

The  question  of  appropriating  money  for  these  purposes 
was  seriously  discussed  during  the  fifties.  It  was  argued 
that  since  each  county  supported  its  own  poor  the  same 
method  should  be  applied  to  these  institutions.  It  was  con- 
tended that  after  the  respective  counties  had  provided  for 
their  sick,  lame  and  infirm,  it  would  be  unjust  to  compel 
them  to  contribute  to  similar  expenses  in  other  localities. 
The  support  of  hospitals  by  general  taxation  was  also  con- 
sidered unjustifiable. 

The  control  over  these  state  institutions  is  exercised  by 
the  State  Board  of  Charities  which  was  organized  in  1867. 
It  is  composed  of  twelve  members,  appointed  by  the  gov- 
ernor for  eight  years,  one  from  each  of  the  nine  judi- 
cial districts  and  three  from  New  York  City.  The  members 
are  not  paid  a  salary,  but  receive  $10  per  day  for  expenses 
when  attending  meetings,  but  such  expense  shall  not  exceed 
$500  per  year.  The  Constitution  of  1894  *  provides  that 
this  board  shall  visit  and  inspect  all  institutions,  whether 
state,  county,  municipal,  incorporated  or  not  incorporated, 
which  are  of  a  charitable,  eleemosynary,  correctional  or  re- 
fonnatory  character,  excepting  only  such  as  are  subject 
to  the  visitation  and  inspection  of  the  State  Commission  in 
Lunacy  and  State  Commissioner  of  Prisons. 

The  supervision  of  the  State  Board  of  Charities,  prior  to 
the  year  1894,  was  largely  of  an  advisory  character,  its 
visits  were  more  or  less  perfunctory  and  its  regulations 
were  confined  mainly  to  outlining  general  policies  of  ad- 
ministration. The  managers  of  institutions  exerted  all  their 
influence  to  induce  the  legislature  to  make  as  large  appro- 

*  Art.  viii,  sec.  11. 


535 ]  EXPENDITURES  2 1 1 

priations  as  possible  and  the  appropriations  were  expended 
without  anybody  knowing  much  about  where  or  how  the 
money  was  used.  Each  institution  was  conducted  in  such  a 
manner  as  to  afford  the  locality  an  avenue  to  the  state  treas- 
ury. Local  dealers  combined  to  furnish  supplies  at  ad- 
vanced prices  and  supplies  of  inferior  qualities  were  sold. 
Beginning  in  1894,  each  institution  was  required  to  make  a 
detailed  statement  of  the  expenditures  necessary  for  the  fol- 
lowing month,  and  the  comptroller  was  given  power  to  alter 
or  to  revise  the  estimates  for  supplies  both  as  to  quantity  and 
cost.  A  uniform  system  of  bookkeeping  was  also  installed 
in  each  institution  reporting  to  the  comptroller. 

In  order  that  the  comptroller  might  have  some  basis  for 
his  revision  of  estimated  expenditure,  a  committee  was  sent 
to  visit  every  institution  in  order  to  collect  statistics  of  ex- 
penditures and  amounts  purchased.  Some  astonishing  dis- 
coveries were  made  regarding  the  management  of  state  in- 
stitutions. As  a  consequence  one  entire  board  of  managers 
resigned  and  several  individual  members  of  other  boards  re- 
signed. It  was  found  that  vicious,  criminal  women  and  in- 
sane women  were  housed  with  the  girls  in  the  Hudson  House 
of  Refuge;  adults  of  50  years  of  age  and  unteachable  idiots 
were  found  in  the  Institution  for  Feeble-Minded  Children ; 
murderers  and  old  offenders  were  found  at  Elmira  Re- 
formatory. Uneconomical  and  extravagant  methods  pre- 
vailed in  many  institutions.  A  knowledge  of  the  facts  re- 
sulted in  a  marked  improvement  in  the  management  of  these 
institutions.  A  proper  segregation  of  inmates  was  effected 
and  many  remedies  introduced  in  the  interest  of  economy. 

The  supervision  over  the  purchasing  of  supplies  resulted 
in  a  reduction  of  per  capita  cost  from  $134  to  $96  for  the 
eleven  institutions  under  the  supervision  of  the  comptroller, 
but  no  general  control  was  exercised  over  the  amount  of 
salaries  and  wages  paid  to  employees.    The  per  capita  cost 


212        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [536 

of  salaries,  wages  and  labor  had  increased  from  $66  in 
1893  to  $78  in  1895  in  the  Hudson  House  of  Refuge;  from 
$143  to  $165  in  the  School  for  Blind  at  Batavia,  and  simi- 
lar increases  occurred  in  the  other  institutions.  In  1899, 
supervision  was  extended  to  this  item  also ;  the  comptroller 
and  president  of  the  State  Board  of  Charities  were  given 
power  to  classify  the  employees  and  officers  into  grades  and 
fix  salaries  and  wages.  The  per  capita  cost  of  this  item  in 
1909  was  $81  for  all  institutions,  and  constituted  nearly 
one-half  of  the  total  expenditures.  The  expenditures  for 
maintenance  are  classified  under  eleven  heads  as  fol- 
lows, named  in  the  order  of  their  importance:  salaries 
and  wages,  provisions,  fuel  and  light,  clothing,  shop,  farm 
and  garden  supplies,  household  stores,  transportation  of 
inmates,  hospital  and  medical  supplies,  miscellaneous  ex- 
penses of  managers  and  ordinary  repairs.  The  first  four 
items  amount  to  a  per  capita  expenditure  of  $159  out  of  a 
total  of  $178,  and  it  is  in  connection  with  these  that  the 
greatest  economies  can  be  made  in  the  future.  The  state 
now  has  3,000  acres  under  cultivation  employed  in  raising 
food  for  the  inmates. 

A  great  saying  to  the  state  may  be  made  through  the  in- 
troduction of  improved  methods  of  intensive  agriculture. 
Another  economy  may  result  from  the  selection  of  proper 
foods  by  a  dietary  expert.  Perhaps  another  economy  will 
result  from  the  establishment  of  a  central  purchasing  de- 
partment for  all  state  institutions.  The  method  of  purchas- 
ing supplies  by  the  month  has  been  found  to  be  uneconomical 
because  of  the  variations  in  prices  throughout  the  year,  and 
by  purchasing  the  total  year's  supply  at  that  season  of  the 
year  when  prices  of  commodities  are  lowest,  a  saving  of 
many  thousands  of  dollars  may  be  achieved.  A  central 
purchasing  board  consisting  of  the  president  of  the  board 
of  charities,  of  the  commission  in  lunacy  and  the  com- 


537]  EXPENDITURES  213 

missioner  of  prisons  might  regulate  the  purchase  of  sup- 
plies by  contract  for  all  three  classes  of  institutions. 

The  financial  management  of  the  state  charitable  insti- 
tutions remained  in  the  same  chaotic  condition  that  pre- 
vailed with  regard  to  the  prisons  prior  to  1854.  No  careful 
or  accurate  accounts  of  receipts  and  expenditures  were 
kept,  and  money  was  expended  without  the  knowledge  or 
consent  of  the  comptroller  or  any  of  the  supervising  de- 
partments of  the  state.  This  was  not  remedied  until  1894, 
when  a  bureau  in  the  comptroller's  office  exercised  super- 
vision over  these  institutions,  and  in  1902  a  separate  depart- 
ment, known  as  the  fiscal  supervisor  of  charities,  was  ap- 
pointed to  supervise  the  financial  operations  of  the  state 
charitable  institutions. 

The  present  value  of  these  nineteen  institutions  is  $8,- 
708,302,  representing  8,214  acres  of  land  worth  $2,854,- 
299  and  buildings  worth  $5,854,002.  The  total  expendi- 
tures of  the  institutions  reporting  to  the  fiscal  supervisor  of 
charities  for  the  year  1909  were  $1,914,819,  which  made 
the  per  capita  cost  for  the  10,144  inmates  cared  for  $178. 
The  number  of  employees  in  state  charitable  institutions 
was  1,546.  In  addition  to  these  state  institutions  the  state 
contributes  $775,051  to  ten  private  institutions. 

It  has  been  the  policy  of  the  state  to  secure,  as  far  as 
possible,  payments  tov/ard  the  support  of  the  inmates  either 
from  friends  of  the  defective  persons  where  they  are  able 
to  pay  or  from  the  county  from  which  the  inmates  came, 
but  such  payments  do  not  exceed  the  cast  of  maintenance. 
The  cost  of  transporting  inmates  to  and  from  state  insti- 
tutions is  also  a  charge  upon  the  county  or  is  borne  by 
friends  of  the  defective  persons.  The  number  supported  in 
state  institutions  is  a  very  small  part  of  the  total  number  of 
inmates  in  charitable  institutions.  In  1909  there  were 
76,171  persons  in  institutions  receiving  public  money  and 


214       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [538 

under  the  supervision  of  the  State  Board  of  Charities.  Of 
this  number  6,233  were  in  county  almshouses,  10,487  in  city 
and  town  almshouse  institutions,  33,686  in  homes  for  chil- 
dren, and  8,893  in  hospitals. 

The  charitable  institutions  are  still  in  the  constructive 
period.  The  State  Board  of  Charities  estimates  that  $8,- 
712,500  will  be  needed  to  complete  the  established  state 
charitable  and  reformatory  institutions.  Four  new  insti- 
tutions have  been  built  during  the  last  decade,  and  the  de- 
mand for  more  accommodations  is  still  urgent.  The 
capacity  of  the  nineteen  charitable  institutions  was  given 
as  8,651,  whereas  in  1909  the  total  number  of  inmates  was 
10,144.  The  annual  expenditure  for  these  institutions  ex- 
ceeded a  million  dollars  in  1888 ;  by  1904,  it  had  passed  the 
two  million  mark,  and  in  19 10  it  amounted  to  nearly  three 
millions.  For  the  decade  1900- 19 10,  it  amounted  to  about 
one-tenth  of  the  total  expenditures  from  the  General  Fund.^ 

Curative. — The  State  Commission  in  Lunacy  (changed 
to  the  State  Hospital  Commission  in  July,  1912)  was  es- 
tablished in  1889.^  The  constitution  of  1894  *  provided 
that  it  should  visit  and  inspect  all  institutions,  either  public 
or  private,  used  for  the  care  and  treatment  of  the  insane 
(not  including  institutions  for  epileptics  or  idiots).  The 
six  asylums  existing  at  that  time  contained  5,201  patients, 
and  the  annual  charge  upon  the  state  for  their  support  was 
$688,031,  or  about  one-tenth  of  the  total  general  fund  ex- 
penditures at  that  time.  Many  of  the  insane  were  still  sup- 
ported in  town  and  city  or  county  almshouses  or  in  the 
state  charitable  institutions.  In  1893,  the  "  State  Care 
Act "  was  passed  by  which  all  the  insane  patients  ceased  to 
be  a  charge  upon  the  several  counties  and  became  a  charge 

»  A.  R.  Comptroller,  igio,  p.  7. 

*  Chap.  28.  •  Art.  viii,  sec.  11. 


^39]  EXPENDITURES  21 5 

Upon  the  state.  A  tax  of  one-third  of  a  mill  was  imposed 
to  raise  funds  for  carrying  out  the  provisions  of  this  law. 
The  insane  patients  were  transferred  to  the  state  hospitals 
as  rapidly  as  buildings  could  be  provided  for  them,  so  that 
in  1909,  of  the  whole  number  of  31,540  insane  persons  in 
the  state,  30,490  were  in  state  institutions  and  the  remainder 
were  in  private  institutions  licensed  by  the  Commission  in 
Lunacy.  The  state  now  has  fourteen  state  hospitals  upon 
which  there  has  been  expended  for  building  equipment  and 
furnishing  the  sum  of  $27,970,995.  Many  of  the  hospitals 
are  overcrowded  and  there  is  now  a  shortage  of  proper  ac- 
commodations for  about  1,500  patients.  The  annual  in- 
crease of  patients  is  about  1,000,  so  that  the  expenditures 
for  new  hospitals  is  apt  to  continue  in  the  future  with  no 
visible  signs  of  relief  from  the  growing  burden.  The  land 
has  been  purchased  for  a  new  hospital  which  is  greatly 
needed.  During  the  quarter  of  a  century  from  1888  to  191 2 
the  expenditures  for  this  purpose  have  increased  from  $1,- 
646,289  to  $7,357,973,  and  they  now  constitute  the  largest 
single  item  of  expenditure,  or  over  18  per  cent  of  the  total 
general  fund  expenditures. 

The  State  Commission  in  Lunacy  was  the  first  to  exercise 
rigid  control  over  the  expenditures  of  the  various  institu- 
tions and  to  make  whatever  internal  economies  were  pos- 
sible. In  1896,  a  board  consisting  of  the  governor,  secre- 
tary of  state,  comptroller  and  commissioner  of  lunacy 
was  given  power  to  supervise  and  revise  the  salaries  and 
wages  paid  to  the  employees  in  the  state  hospitals.  Here, 
as  in  the  case  of  the  charitable  institutions,  the  largest  items 
of  expenditure  are  for  salaries  and  wages,  for  provisions, 
and  for  fuel  and  light.  These  three  items  amount  to  a  per 
capita  cost  of  $161  out  of  a  total  per  capita  cost  of  $191. 
There  is  not  much  reason  to  expect  any  marked  economies 
in  the  management  of  these  institutions  in  the  near  future. 


2i6       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [540 

Some  small  saving  may  be  made  in  connection  with  the  pur- 
chasing of  provisions  and  stores  and  of  fuel,  but  for  a  con- 
siderable time  to  come  we  may  expect  constantly  increasing 
expenditures  for  state  hospitals.  The  situation  is  entirely 
different  from  that  of  the  charitable  institutions  whose  in- 
mates may  be  taught  to  contribute  something  towards  their 
support.  In  view  of  the  increase  of  patients  of  about  i,ooQ 
a  year,  it  would  seem  that  expenditures  both  for  new  build- 
ings and  for  maintenance  are  apt  to  continue  indefinitely. 

Up  to  the  present  time  the  policy  of  the  state  has  been  to 
build  its  public  buildings  out  of  income,  a  "  method  of 
financing  which  no  private  business  would  be  expected  to 
adopt  and  a  sharp  contrast  with  the  resort  to  bond  issues 
necessarily  prevailing  in  the  case  of  most  municipalities."  ^ 
The  future  policy  of  the  state  should  be  to  construct  its 
public  buildings  by  the  issuance  of  bonds,  because  these 
buildings  will  be  inherited  by  coming  generations,  and  it  is 
only  reasonable  and  just  to  ask  them  to  share  the  burdens. 

In  adopting  a  policy  for  the  construction  of  future  hos- 
pitals and  charitable  institutions  a  standard  style  of  build- 
ing should  be  adopted.  The  style  should  be  that  one  which 
has  been  found  to  be  best  suited  to  the  class  of  patients  for 
which  it  is  intended,  and  in  this  way  the  cost  of  the  build- 
ing and  the  maintenance  cost  per  year  can  be  accurately 
known  beforehand.  Experience  tends  to  show  that  small 
institutions  are  more  expensive  to  maintain  than  large  ones, 
owing  to  the  fact  that  the  per  capita  cost  of  care  and  man- 
agement is  much  greater  in  proportion  in  the  smaller  insti- 
tutions. It  has  already  been  pointed  out  that  the  per  capita 
cost  of  salaries  and  wages  constitute  from  one-third  to  one- 
half  of  the  total  per  capita  cost  in  the  existing  institutions. 
The  New  York  Soldiers'  and  Sailors'  Home  supports  2,00a 

;  ^  A.  R.  Comptroller,  1910,  p.  7. 


541  ]  EXPENDITURES  21/ 

inmates  at  a  cost  of  $148  per  capita,  while  the  School  for  the 
Blind  at  Batavia  supports  136  inmates  at  a  cost  of  $418  per- 
capita.  While  it  will  always  be  true  that  some  classes  of 
patients  will  be  more  expensive  than  others,  owing  to  the 
greater  amount  of  care  and  supervision  required,  yet  for 
each  particular  class  of  defectives  some  one  type  of  build- 
ing may  be  found  which  will  give  the  maximum  accommo- 
dations with  the  least  cost.  It  would  seem  that  no  better 
place  could  be  found  for  studying  this  problem  than  among 
the  various  state  and  private  institutions  of  this  state. 

Protective. — The  expenditures  which  are  classified  under 
this  item  include  those  for  public  buildings,  public  lands, 
Forest,  Fish  and  Game  Commission  (changed  to  Conser- 
vation Department  in  1912),  Indian  affairs,  and  the  main- 
tenance of  the  various  monuments,  parks,  reservations  and 
historic  buildings.  With  a  few  noteworthy  exceptions  in 
recent  years,  the  policy  of  the  state  has  been  to  pay  for  the 
erection  of  public  buildings  and  for  the  acquisition  of  lands 
for  the  purpose  of  establishing  parks  or  reservations  out 
of  the  annual  receipts  in  the  treasury.  Short-term  bonds 
have  been  issued  for  defraying  the  expenses  of  acquiring 
the  Niagara  Reservation,  Adirondack  Park,  and  Saratoga 
Springs  State  Reservation. 

The  fallacy  of  including  such  expenditures,  which  go 
toward  permanent  investment  and  improvements  among  the 
annual  current  expenses,  is  apparent.  Not  only  should  the 
cost  of  all  such  permanent  improvements  be  paid  out  of  the 
receipts  from  bonds,  but  the  length  of  term  of  the  bonds 
issued  should  bear  some  definite  relation  to  the  probable 
life  of  the  improvement.  Otherwise  it  might  conceivably 
happen  that  the  people  would  be  required  to  redeem  the 
bonds  long  after  the  improvements  had  ceased  to  exist. 
While  this  matter  is  most  important  when  considering  the 
constructions  of  highways,  the  life  of  which  is  compara- 


2i8        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [542 

tively  short,  yet  it  should  not  be  wholly  disregarded  in  the 
matter  of  constructing  public  buildings. 

Indian  Affairs. — The  Indians  living  within  the  state  have 
been  a  constant  source  of  expense,  although  the  sums  an- 
nually paid  have  not  been  large.  In  18 19,  there  were  not 
over  5,000  Indians  living  in  the  state,  scattered  about  on 
different  reservations.  In  that  year  they  owned  270,000 
acres  of  land.  From  time  to  time  treaties  have  been  nego- 
tiated with  the  various  tribes  whereby  the  state  has  secured 
large  tracts  of  land  in  return  for  which  it  has  agreed  to 
pay  to  them  perpetual  annuities.  A  few  examples  will  show 
the  terms  of  these  treaties.  By  a  treaty  with  the  St.  Regis 
Indians  in  18 18  the  state  received  2,000  acres  for  which  it 
agreed  to  pay  a  perpetual  annuity  of  $200,  and  the  next 
year,  by  a  treaty  with  the  Stockbridge  Indians,  the  state  se- 
cured 5,390  acres  by  paying  $5,390  cash  and  a  perpetual 
annuity  of  $322.  These  annuities  comprise  the  largest  part 
of  the  payments  made  to  the  Indians,  although  there  are  a 
few  other  expenses  for  the  erection  and  maintenance  of 
schools  and  churches  and  the  salaries  of  superintendents  or 
agents  of  the  various  tribes.  The  expenditures  for  Indian 
affairs  in  19 12  amounted  to  $8,610. 

Constructive. — The  constructive  expenditures  include  the 
expenses  of  the  offices  of  the  State  Engineer  and  Surveyor, 
the  Superintendent  of  Public  Works,  the  State  Architect, 
and  the  Highway  Department.  The  first  two  departments 
have  to  do  with  the  canal  construction,  and  have  already 
been  dealt  with  under  the  chapters  on  Internal  Improve- 
ments. Some  account  will  be  given  here  of  the  highway 
construction.  If  the  recommendations  of  the  Water  Supply 
Commission  are  carried  out,  the  construction  of  the  dams 
and  reservoirs  will  fall  under  this  heading,  and  so  a  short 
notice  will  be  given  here  of  the  work  of  the  Water  Supply 
Commission  which  was  created  in  1905,  and  which  is  now 
included  under  the  State  Conservation  Department. 


543]  EXPENDITURES  219 

Highways. — The  expenditure  of  state  funds  for  the  im- 
provement and  maintenance  of  highways  began  in  1898. 
A  century  earher  the  state  had  furthered  the  improvement 
of  roads  by  granting  charters  to  turnpike  companies  and  to 
bridge  companies.  These  were  allowed  to  charge  tolls  to 
keep  the  roads  and  bridges  in  repair  and  to  retain  a  profit. 
Later  the  state  regulated  the  rates  of  tolls  charged,  and  as 
the  charters  of  these  companies  expired,  the  roads  became 
the  property  of  the  state  either  by  purchase  or  otherwise. 
For  a  time  the  state  maintained  some  toll  roads,  but  sooner 
or  later  they  all  became  free  public  highways.  About  the 
only  evidences  of  this  early  policy  are  the  few  toll  bridges 
which  still  exist,  but  which  will  soon  all  be  taken  over  by 
the  state  and  become  free  bridges. 

The  care  and  maintenance  of  public  highways  was  left 
entirely  to  the  local  subdivisions,  with  certain  restrictions 
placed  upon  the  amount  which  might  be  raised  for  this  pur- 
pose. In  1801,  the  board  of  supervisors  could  assess  prop- 
erty for  road  improvements  up  to  $1,000  per  county.  The 
Commissioner  of  Highways  in  each  county  had  charge  of 
the  roads,  and  every  free  male  over  twenty-one  years  of 
age  was  liable  to  road  duty,  except  ministers  and  county 
officials. 

The  year  1898  marked  a  new  era  in  the  management  of 
public  highways.  The  Hibgee- Armstrong  Act  of  that  year 
provided  for  the  construction  of  a  limited  number  of  costly 
macadam  roads  by  the  state  authorities  who  were  to  have 
sole  charge  of  the  work.  The  cost  was  apportioned  among 
the  state,  counties  and  towns,  in  the  ratio  of  50,  35  and  15 
per  cent  respectively.  The  Money  System  Act  was  designed 
to  encourage  the  abandonment  of  the  antiquated  system  of 
working  out  the  highway  tax.  Under  it  the  state  paid  to 
each  town  which  abandoned  the  labor  system,  and  paid  its 
highway  tax  in  cash,  a  sum  equal  to  25  per  cent  of  the  tax 


220       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [544 

levied.  The  initiative  under  both  acts  was  left  entirely  with 
the  local  authorities  and  the  money  was  paid  over  to  the 
local  highway  officials  and  expended  as  they  saw  fit. 

A  few  years  later  the  state  engineer  was  given  super- 
visory power  over  the  expenditures  of  money,  and  the  town 
officials  were  required  to  render  accounts  to  him  for  all 
highway  funds  raised  in  the  town,  or  donated  to  it  by  the 
state.  The  number  of  towns  working  under  the  money 
system  in  1908  was  650  out  of  the  933  towns  in  the  state. 
In  this  year  the  labor  system  was  abolished  and  all  towns 
were  compelled  to  come  under  the  money  system.  The 
amount  paid  to  the  several  towns  as  the  state  aid  for  the 
repair  of  highways  was  $1,665,500  in  19 12,  and  the  total 
amount  contributed  since  1898  was  $10,111,150.^ 

A  new  plan  was  adopted  in  1907  in  order  to  lessen  the 
cost  of  improvement  in  the  poor  counties  and  towns.  Under 
this  plan  the  cost  borne  by  the  county  and  town  was  based 
upon  the  average  assessed  valuation  of  property  per  mile. 
The  counties  paid  two  per  cent  of  the  cost  of  improvement 
for  each  $1,000  of  assessed  valuation  per  mile  of  highway 
within  the  county,  and  the  town  paid  one  per  cent  for  each 
$i,aoo  of  assessed  valuation  per  mile,  and  the  state  paid  the 
balance,  except  that  in  no  case  should  the  county  pay  more 
than  35  per  cent,  nor  the  town  more  than  15  per  cent,  of  the 
total  assessed  valuation.  The  total  amount  paid  by  the 
state  according  to  this  act  was  $1,350,000,  and  the  amount 
raised  locally  amounted  to  $73,350  in  1910.^ 

The  amount  of  state  aid  given  for  repairs  and  mainten- 
ance was  increased  from  25  per  cent  to  100  per  cent  in  some 
cases.  The  exact  percentage  varied  with  the  amount  of 
assessed  valuation  per  mile  as  follows :  in  towns  having  an 

^  A.  R.  Comptroller,  1913,  p.  xx. 

*  A.  R.  Highway  Commission,  p.  162. 


545]  EXPENDITURES  221 

assessed  valuation  per  mile  of  highways  less  than  $5,000, 
the  state  paid  100  per  cent;  towns  between  $5,000  and 
$7,000,  the  state  paid  90  per  cent,  and  the  percentage  paid 
by  the  state  decreased  as  the  valuation  increased,  until  it 
reached  50  per  cent,  which  was  the  amount  contributed  to 
all  towns  having  an  assessed  valuation  per  mile  of  $13,000. 
No  town  should  receive  state  aid  in  any  year  to  an  amount 
exceeding  the  average  of  $25  per  mile  for  the  total  mileage 
of  its  highway,  exclusive  of  incorporated  villages,  except 
that  in  towns  whose  assessed  valuation  averaged  more  than 
$25,000  per  mile,  the  amount  of  state  aid  was  limited  to 
one-tenth  of  one  per  cent.  The  total  amount  expended 
under  this  act  was  $2,526,612,  of  which  amount  the  state 
contributed  $1,441,751.^  The  maximum  amount  of  state 
aid  which  the  towns  in  the  different  counties  are  entitled  to 
draw  in  any  one  year  is  $2,199,177.  In  19 13,  only  229 
towns  raised  sufficient  highway  funds  to  draw  their  full 
amount  of  state  aid. 

An  amendment  to  the  constitution  was  made  in  1905,  by 
which  the  state  was  authorized  to  issue  bonds  to  the  extent 
of  $50,000,000,  the  proceeds  of  which  were  to  be  used  in 
paying  the  state's  share  of  the  expense  of  improving  roads.' 
These  were  payable  in  fifty  years.  The  first  million  was 
issued  in  1906  at  three  per  cent,  but  due  to  adverse  market 
conditions  the  rate  was  raised  to  four  per  cent.  Up  to  De- 
cember 31,  1912,  there  had  been  issued  $34,000,000  of  these 
bonds.  An  annual  appropriation  was  made  out  of  the  gen- 
eral funds  to  provide  for  the  highway  improvement  sinking 
fund.    In  1 912  this  contribution  amounted  to  $1,755,667. 

The  present  system  of  public  highways  includes  the  im- 
provement, maintenance  and  repair  of  three  divisions :  ( i ) 

^Ibid.,  p.  226. 
'  Art.  vii,  sec.  12. 


222        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [546 

the  state  highways,  consisting  of  through  routes  running 
across  the  state,  aggregating  3,514  miles,  which  are  to  l^e 
improved  solely  at  the  expense  of  the  state;  (2)  the  county 
highways,  consisting  of  main  roads,  aggregating  8,380 
miles,  which  are  to  be  improved  at  the  joint  expense  of  the 
state,  county  and  town  in  the  manner  above  explained;  (3) 
the  town  roads,  embracing  all  roads  not  to  be  improved  as 
state  or  county  highways,  aggregating  about  77,000  miles; 
these  are  maintained  and  repaired  as  earth  roads  at  the  ex- 
pense of  the  towns  plus  the  aid  donated  by  the  state.  A 
Commission  of  Highways  was  established  in  1909  to  relieve 
the  state  engineer  of  these  duties  and  to  have  charge  of  road 
improvement.^ 

The  Highway  Department  also  has  charge  of  the  elimi- 
nation of  grade  crossings.  In  the  case  of  state  roads  cross- 
ing a  railway,  the  state  pays  half  and  the  railroad  half  of 
the  expense  of  constructing  grade  crossings.  In  the  case 
of  county  roads,  the  railroads  pay  one-half  the  expense  and 
the  other  half  is  divided  proportionately  among  the  state, 
county  and  towns. 

Of  the  original  issue  of  $50,000,000,  there  had  been  ex- 
pended at  the  close  of  191 1,  the  sum  of  $48,955,000,  leav- 
ing only  $1,045,000  unexpended.  Of  the  8,380  miles  of 
county  highways,  there  had  been  completed  3,155,  and  the 
present  appropriations  were  sufficient  to  complete  600  miles, 
thus  leaving  nearly  4,500  miles  still  unfinished.  Of  the 
3,514  miles  of  state  highways  there  had  been  completed 
2,073,  thus  leaving  1,441  unprovided  for. 

This  large  amount  of  road  construction  was  secured  only 
by  the  special  appropriation  of  $13,955,000  for  the  early 
completion  of  certain  expedited  routes  which  it  was  thought 
were  in  urgent  need  of  completion.     The  first  $50,000,000 

*  Laws  of  1909,  chap.  30. 


^47]  EXPENDITURES  223 

was  spent  in  building  short  stretches  of  road,  scattered  about 
throughout  the  state.  The  roads  began  nowhere  and  ended 
nowhere,  they  were  not  connected  up  with  through  routes, 
and  if  they  had  been  allowed  to  remain  in  the  condition  in 
which  they  were  when  the  first  $50,000,000  was  spent,  they 
would  have  been  practically  useless.  The  appropriations 
for  the  expedited  routes  were  a  belated  effort  to  remedy  this 
situation  and  connect  up  at  least  some  of  these  disconnected 
pieces  of  roads. 

The  present  distribution  of  the  highway  funds  is  largely 
in  the  hands  of  the  Highway  Commission,  the  distributions 
being  based  upon  the  ratio  of  the  county  mileage  to  the  state 
mileage.  The  appropriation  for  certain  expedited  routes 
gave  these  favored  counties  more  than  their  proportionate 
share  of  the  state  funds,  and  in  dividing  the  eight  million 
dollars  appropriated  for  highway  construction  in  191 1,  one- 
half  was  set  aside  and  apportioned  to  those  counties  which 
were  not  being  benefited  by  these  special  appropriations, 
and  the  other  half  was  apportioned  among  all  counties ;  but 
those  counties  which  were  receiving  an  excess  of  state  mil- 
eage received  no  county  mileage.^  An  act  making  provision 
for  issuing  another  $50,000,000  of  highway  bonds  was 
passed  and  received  the  favorable  vote  of  the  people  at  the 
general  election  in  1912.^  Twenty  millions  of  this  is  for 
state  highways  and  thirty  millions  for  county  highways,  the 
money  being  apportioned  among  the  counties  according  to 
population,  area  and  mileage  of  improved  highways.  The 
legislature  has  appropriated  one-tenth  of  this  amount. 

The  constitution  provides  for  the  creation  of  a  sinking 
fund  of  at  least  two  per  cent  per  annum  to  discharge  the 
principal  and  interest  on  these  bonds,  and  counties  and 

*  State  Highway  Com.,  1912,  p.  20. 
'  Laws  of  1912,  chap.  298. 


224       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [548 

towns  can  be  compelled  to  pay  their  proportionate  share, 
provided  no  county  shall  be  required  to  pay  more  than 
thirty-five  one-hundredths  of  the  cost  or  no  town  more  than 
fifteen  one-hundredths  of  the  cost  of  the  highway.  Since 
the  bonds  were  to  run  for  fifty  years,  the  provision  fixing 
the  minimum  rate  at  two  per  cent  was  doubtless  intended  to 
provide  for  the  sinking  fund  at  the  time  of  payment.  But 
since  the  sinking  funds  are  to  be  invested,  this  makes  no 
provision  for  the  accumulating  interest.  The  result  is  that 
at  the  present  time  there  is  an  excess  in  the  highway  sinking 
fund  of  $3,394,395-  The  framers  of  the  constitution  failed 
to  consider  the  earning  power  of  the  sinking  funds,  and  the 
best  remedy  now  would  seem  to  be  an  amendment  to  the 
constitution. 

Water  Supply  Commission. — Another  result  of  the  ex- 
panding activities  of  the  state  into  new  fields  of  endeavor 
has  been  the  appointment  of  a  Water  Supply  Commission 
in  1905,  to  exercise  supervision  over  the  course  adopted  by 
the  municipalities  and  local  divisions  in  acquiring  control 
over  the  water  supply  of  the  state.  Every  municipality 
must  submit  plans  to  the  commission  and  have  them  ap- 
proved before  it  can  take  over  a  new  source  of  water  supply. 

The  work  of  the  commission  has  not  stopped  here  how- 
ever. It  has  made  extensive  surveys  of  the  most  important 
rivers  and  basins  which  might  be  used  to  form  reservoirs 
to  furnish  additional  water  power  for  the  industries  of  the 
state.    Two  of  the  proposed  projects  may  be  cited. 

The  Sacandago  project  is  to  construct  a  dam  at  Conkling- 
ville  on  the  Sacandago  river,  about  fifty  miles  north  of  Al- 
bany, thus  creating  a  storage  reservoir  of  29,000,000  cubic 
feet  capacity  and  converting  thirty  miles  of  the  present  river 
valley  into  an  artificial  lake  of  the  same  size  at  Lake 
George.  It  is  estimated  that  such  a  reservoir  would  furnish 
85,500  additional  horse-power  continuously  throughout  the 


549J  EXPENDITURES  22$ 

year.  The  total  cost  is  estimated  at  $4,650,000,  and  the  net 
revenue  after  paying  fixed  sinking  fund  charges  and  for 
maintenance  is  estimated  at  $189,800. 

The  Schroon  project  is  to  construct  a  storage  reservoir 
of  16,000,000  cubic  feet  capacity  on  the  Schroon  river, 
which  would  be  capable  of  furnishing  52,000  additional 
horse-power.  The  estimated  cost  is  given  as  $1,900,000, 
and  the  net  revenue,  after  paying  all  expenses,  is  estimated 
at  $152,000. 

Surveys  have  also  been  made  of  the  Orange,  Raquette, 
Black  and  Genesee  rivers  and  of  many  others,  and  the  prob- 
able cost  and  probable  additional  horse-power  has  been  com- 
puted. The  horse-power  furnished  by  streams  in  1908  was 
600,000,  and  the  total  possibilities  of  the  streams  of  the 
state  is  estimated  at  1,500,000  horse-power. 

The  arguments  presented  by  the  commission  in  favor  of 
the  state's  undertaking  this  work  seem  to  be  conclusive.  In 
the  first  place,  the  project  involves  the  flooding  of  thousands 
of  acres  of  land,  and  to  be  successfully  executed  the  power 
of  eminent  domain  must  be  invoked.  State  action  would 
insure  the  fullest  possible  utilization  of  the  power  possi- 
bilities of  each  stream.  The  state  has  greater  financial 
strength,  and  thus  can  borrow  funds  at  a  lower  rate  of  in- 
terest than  a  private  company.  State  supervision  will  be 
needed  to  ensure  the  safety  of  the  construction  and  main- 
tenance of  the  dams.  Perhaps  the  most  important  argu- 
ment presented  is  that  state  action  will  "  ensure  the  equal 
participation  of  all  citizens  in  this  form  of  natural  wealth, 
which  is  particularly  the  heritage  of  the  whole  people."  ^ 

General. — Under  this  item  we  have  included  the  sums 
paid  out  by  the  state,  acting  as  agents  for  the  local  sub- 
divisions or  for  the  United  States  government.    During  the 

*  Assem.  Doc,  1910,  No.  34,  p.  97. 


226       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [55Q 

first  eleven  years,  the  state  spent  $441,000  in  redeeming  and 
canceling  bills  of  credit,  which  had  been  issued  prior  to  the 
adoption  of  the  constitution.  Later  it  advanced  money  to 
counties  for  arrears  of  taxes,  sums  were  paid  out  for  the 
redemption  of  lands  sold  for  taxes  etc.,  and  it  also  paid  the 
United  States  direct  tax  out  of  the  state  treasury.  Strictly 
speaking,  this  item  ought  not  to  be  included  among  the  ordi- 
nary expenditures,  but  it  is  difficult  to  classify  it  elsewhere. 

The  payments  for  the  support  of  the  State  Banking  and 
Insurance  Departments  are  made  directly  out  of  the  treas- 
ury, in  the  first  instance,  but  the  treasury  is  subsequently  re- 
imbursed by  means  of  assessment  levied  on  the  various 
banks  and  insurance  companies  under  the  control  of  the  de- 
partment. Under  this  item  is  also  included  the  interest 
paid  on  temporary  loans  and  the  small  amounts  paid  as 
bounties. 

From  1789  to  1795  bounties  were  paid  upon  hemp.  In 
1808,  $2,000  was  given  away  in  premiums  on  woolen  cloth, 
and  later  bounties  were  extended  to  the  manufacture  of 
broadcloth.  Later  salt  bounties  were  paid.  The  sums  paid 
varied  from  a  few  hundred  dollars  to  a  few  thousand,  and 
it  is  very  doubtful  if  these  payments  had  any  material  stimu- 
lating effect  upon  the  industries  so  aided.  Bounties  paid  for 
the  destruction  of  wolves  and  other  wild  animals  cost  the 
state  thousands  of  dollars;  in  182 1,  $22,659  was  paid  out 
for  this  purpose.  The  state  and  counties  shared  equally  in 
the  expense.  A  bounty  of  $20  was  paid  on  every  full- 
grown  wolf,  and  the  county  in  which  the  wolf  was  killed 
raised  an  equal  amount. 


CHAPTER  X 
Management  of  Funds 

The  fiscal  officers  of  the  state,  in  1789,  consisted  of  a 
treasurer  and  auditor.  In  addition  a  legislative  com- 
mittee was  appointed  to  assist  the  auditor  in  examining 
the  treasurer's  accounts,  which  were  examined  every  six 
months.  This  method  continued  down  to  1797,  when  the 
office  of  Comptroller  was  established  and  the  office  of 
Auditor  was  abolished. 

Up  to  the  year  1797  the  accounts  were  kept  in  pounds, 
shillings  and  pence,  but  in  that  year  an  act  was  passed  re- 
quiring them  to  be  kept  in  dollars  and  cents.  For  re- 
ducing these  early  figures  to  dollars  and  cents  a  ratio  was 
deduced  from  figures  found  in  the  legislative  documents 
of  the  period,  and  the  ratio  thus  obtained  was  that  one 
pound  equals  $2.50,  or  one  dollar  is  worth  about  eight 
shillings. 

The  fiscal  year  coincided  with  the  calendar  year  from 
1789  to  1819,  in  which  year  it  was  changed  from  De- 
cember 30th  to  November  30th.  In  183 1  it  was  again 
changed  from  November  30th  to  September  30th.  This 
was  done  to  facilitate  accounting,  since  the  different  de- 
partments were  required  to  give  a  report  for  the  quarters 
which  ended  April  ist,  July  ist,  October  ist,  and  January 
1st,  and  it  required  about  six  weeks  to  make  out  the 
financial  report,  which  had  to  be  reported  to  the  legis- 
lature early  in  the  session. 

The  duties  of  the  comptroller  were  to  draw  warrants 
551]  227 


228       FINANCIAL  HISTORY  OF  NEW  YORK  STATE     [552 

on  the  treasurer  for  state  appropriations  and  salaries  of 
officers,  to  examine  and  liquidate  claims  against  the 
state,  to  make  annual  reports  to  the  legislature,  and  to 
suggest  improvements.  He  was  given  power  to  loan  sur- 
plus revenues  in  the  treasury  on  good  land  security  for 
ten-year  periods  at  six  per  cent  interest,  and  to  borrow 
funds  from  banks  to  meet  the  current  expenses  of  the 
state.  The  annual  statements  which  the  comptroller 
made  to  the  legislature  were  simply  statements  of  cash 
receipts  and  disbursements,  and  estimates  of  expenses  for 
the  coming  year,  and  occasionally  improvements  were 
suggested.  The  only  attempt  at  classification  was  to  di- 
vide the  itemized  expenditures  into  annual  appropria- 
tions, permanent  annual  appropriations,  and  specific  ap- 
propriations. Beginning  in  1825,  the  accounts  of  the 
various  funds  were  stated  separately.  In  the  treasurer's 
reports  we  find  page  after  page  of  itemized  accounts, 
with  no  attempt  at  classification. 

The  legislature  made  no  attempt  to  confine  itself 
within  the  estimated  revenues,  and  the  comptroller 
simply  borrowed  money  whenever  appropriations  ex- 
ceeded the  revenue.  It  was  through  this  borrowing 
power  that  the  first  state  debt  was  created.  Up  to  1797 
there  was  an  annual  surplus  of  revenue,  but  beginning 
with  that  year  the  comptroller  had  frequently  to  borrow 
amounts  from  banks.  These  were  strictly  short-time 
loans,  and  were  regarded  of  so  little  consequence  that 
we  find  no  reference  to  them  as  constituting  a  debt  until 
1806,  when  they  amounted  to  $130,000. 

This  plan  was  continued  until  1816,  when  the  debt 
amounted  to  $2,905,335.  In  that  year  a  tax  was  levied 
and  continued  until  this  debt  was  finally  paid  ofT  in  1826. 
Although  the  tax  was  still  needed,  as  shown  by  the  rap- 
idly increasing  deficits  from  1826  to  1829  (deficits  $2,050 


523]  MANAGEMENT  OF  FUNDS  229 

$96,750;  $175,450;  $118,950)  and  was  repeatedly  urged 
by  the  comptroller,  yet  it  was  not  levied,  and  the  capi- 
tal of  the  General  Fund  which  was  invested  in  mortgages 
or  loaned  to  individuals  was  used  as  it  came  into  the 
treasury  in  paying  the  annual  current  expenses.  In 
this  way  the  capital  of  the  General  Fund  was  reduced  from 
$4,396,944  in  1814  to  zero  in  1835.  When  the  General 
Fund  was  exhausted  a  scheme  of  borrowing  money  from 
the  Common  School  Fund,  Literature  Fund  and  Canal 
Fund  was  inaugurated  and  state  stocks  were  issued  for 
these  funds  in  return. 

When  this  policy  of  borrowing  from  funds  was  adopted, 
the  amounts  borrowed  were  not  considered  as  constitut- 
ing a  debt  which  they  really  were,  since  the  state  had 
pledged  itself  to  keep  these  trust  funds  intact.  This 
gave  to  the  annual  statements  of  the  comptroller  a  false 
impression  of  prosperity.  Later  on  in  the  year,  when 
the  trust  funds  needed  these  sums  which  the  state  had 
borrowed  from  them,  it  became  necessary  for  the  state 
to  borrow  money  by  issuing  bonds  to  meet  these  claims, 
and  thus  the  state  debt  was  eventually  increased.  In 
1842  the  state  had  borrowed  from  other  funds  $435,416 
which  represented  the  actual  deficit  for  that  year. 

The  opposition  to  taxation  came  largely  from  those 
counties  not  directly  benefited  by  the  Erie  Canal.  It 
was  felt  to  be  an  injustice,  to  compel  these  counties  to 
pay  taxes  for  improvement  that  benefited  other  coun- 
ties and  it  was  argued  that  the  cause  of  the  annual  de- 
ficits was  due  to  the  diversion  of  a  portion  of  the  General 
Fund  to  the  Canal  Fund,  ms.,  the  auction  duties  and  salt 
duties. 

This  opposition  to  taxation  grew  as  the  funds  began 
to  accumulate  in  large  amounts  in  the  Canal  Fund,  and 
it  was  suggested  that  the  government   should  be  sup- 


230       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [554 

ported  by  borrowing  from  the  Canal  Fund,  or  at  least 
using  the  interest  on  the  accumulation  for  the  benefit  of 
the  treasury.  This  could  not  be  done  on  account  of 
the  constitutional  provision,  and  to  overcome  this  diffi- 
culty and  avoid  the  levying  of  a  tax  the  scheme  of  bor- 
rowing from  trust  funds  was  adopted.  It  was  true  that 
the  constitution  if  strictly  adhered  to  would  have  resulted 
in  the  accumulation  of  at  least  $10,000,000  by  1845,  ^^^ 
the  purpose  of  paying  $2,000,000  but  the  condition  ought 
to  have  been  remedied  by  an  amendment  to  the  consti- 
tution. 

The  business  interests  were  chiefly  concerned  in  push- 
ing the  work  on  the  canal,  and  as  long  as  the  state  was 
able  to  borrow  funds  for  this  purpose  and  the  Canal  Fund 
was  in  a  prosperous  condition  little  attention  was  paid  to 
the  general  expenses  of  the  state.  The  canal  interests 
opposed  taxation  lest  by  burdening  the  people  with  a  tax 
it  would  call  attention  to  amounts  being  spent  on  the 
canal,  and  lessen  appropriations  for  this  purpose.  No 
doubt  the  complicated  condition  of  the  finances,  the  con- 
fusion arising  from  this  system  of  transfer  between  trust 
funds  and  the  General  Fund  concealed  the  true  condition 
of  the  treasury  from  the  average  intelligent  citizen,  and 
gave  to  the  annual  reports  of  the  comptroller  a  false  im- 
pression of  prosperity. 

Whatever  the  cause  was,  the  fact  was  that  no  state  tax 
was  levied  between  the  years  1826  to  1842.  During 
these  years  the  annual  deficits  were  paid  out  of  the  Gen- 
eral Fund  until  it  was  exhausted  and  then  by  borrowing 
from  the  trust  funds,  which  policy  ultimately  resulted  in 
increasing  the  state  debt.  The  General  Fund  debt  in- 
creased from  $561,500  in  1832  to  over  $5,000,000  in  1842. 
Furthermore,  a  contingent  debt  was  growing  through 
the  issuing  of  state  stock  to  railroads  and  canal  com- 


555]  MANAGEMENT  OF  FUNDS  2^1 

panics  which  afterwards  failed.  This  amounted  to  over 
$4,000,000  in  1841.  Finally,  in  1842,  when  the  state 
was  nearly  bankrupt,  a  tax  was  imposed  which  saved  the 
situation,  and  in  1846  a  new  constitution  was  adopted 
which  placed  the  finances  on  a  more  substantial  basis. 

The  only  evidence  of  any  attempt  at  retrenchment  or 
economy  during  this  period  was  that  exercised  over  the 
amount  of  stationery  used  in  the  Senate  and  Assembly, 
and  the  amounts  of  the  salaries  paid  to  the  clerks  of  the 
various  departments.  We  find  carefully  prepared  tables  ^ 
showing  the  quantity  of  paper,  the  number  of  pens, 
knives  and  stamps  supplied  by  the  clerk  of  the  Assembly 
for  every  year  from  1823  to  1842,  and  this  is  supple- 
mented by  a  table  showing  the  amounts  paid  out  of  the 
treasury  for  these  articles.  The  largest  item  is  for  letter 
paper,  for  which  $338  was  paid  in  1842.  On  page  149  of 
the  same  report  we  find  the  amount  paid  to  the  clerks  in 
the  public  offices  for  the  year  1842.  There  were  35  clerks 
listed,  whose  salaries  ranged  from  $400  to  $1,000.'' 

To  find  such  rigid  attempts  made  to  economize  at  a 
time  when  the  legislature  was  appropriating  millions  of 
dollars  annually  to  public  improvements  would  appear 
ludicrous  were  it  not  for  the  fact  that  no  doubt  every 
legislator  was  quite  serious  about  the  matter.  The  same 
sort  of  economy  has  not  been  confined  to  these  earlier 
periods  of  the  state's  history.  The  provisions  of  the 
constitution  of  1846  did  much  to  remedy  a  bad  situa- 
tion by  limiting  the  borrowing  power  of  the  state  and 
by  making  provision  for  the  payment  of  debts,  but  it 
left  the  legislature  free  in  the  matter  of  making  appro- 
priations. 

^A.R.  Comptroller,  1842,  Appendix  Tables  3  and  4. 
^ Ibid.,  Appendix  3  and  4. 


2^2.        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [556 

The  appropriations  of  the  legislature  still  bore  no  re- 
lation to  the  revenues.  Year  by  year  the  state  tax  in- 
creased until  it  reached  the  figure  of  9^  mills  in  1873, 
and  yet  almost  every  year  revealed  a  deficit  due  to  the 
excess  of  appropriations  over  receipts.  In  1854  the 
deficit  of  the  General  Fund  was  $579,054,  and  in  1872  it 
was  $4,800,000.  The  estimates  of  the  comptroller  were 
at  best  "financial  fallacies,"  and  the  supply  bill  usually 
*'  demolished  in  a  single  night  the  most  profound  calcu- 
lation in  the  comptroller's  report."  Appropriations 
"  moss-grown  on  account  of  age,  and  items  of  doubtful 
character  and  unknown  parentage  were  slipped  into  these 
bills  and  crowded  through  the  legislature  in  the  hurry 
and  confusion  attendant  upon  the  closing  hours  of  the 
session." '  In  i860  Governor  Morgan  complained,  re- 
garding the  supply  bill,  that  he  was  only  left  the  choice 
between  depriving  honest  creditors  of  their  dues  or 
authorizing  the  payment  of  thousands  of  dollars  on  de- 
mand, solely  without  foundation.'  It  was  not  until  1874 
that  the  constitutional  amendments  gave  the  governor 
power  to  veto  separate  items  in  the  appropriation  bill.^ 
The  supply  bill  continued  to  be  an  "  annual  abomina- 
tion." In  1863  the  comptroller  described  its  working 
as  follows :  **  It  has  become  a  general  avenue  to  the 
treasury  for  claimants  and  beggars  of  every  description, 
and  seems  to  be  turning  the  capital  into  an  almshouse 
instead  of  a  seat  of  government."  Items  covering  defi- 
ciencies amounted  to  $46,209,  while  items  for  claims  for 
donations  covered  twenty-five  pages  and  swelled  the 
amount  to  over  $630,000.     Sums  donated  to  hospitals, 

^A.  R.  Comptroller,  2855,  p. '14. 
'  Governor's  Message,  1861,  p.  263. 
•Art.  4,  Sec.  9. 


-^7]  MANAGEMENT  OF  FUNDS  233 

dispensaries  and  asylums,  schools  and  other  associations 
strictly  local  in  their  character  amounted  to  over  $200,- 
000.  No  accounts  were  rendered  by  any  of  these  local 
associations,  and  the  comptroller  says  :  "  Whether  this 
large  amount  has  been  expended  upon  objects  for  which 
it  was  appropriated  will  be  known  to  no  branch  of  the 
state  government."  In  1872  the  Private  Charity  Bill, 
carrying  an  appropriation  of  over  one  million  dollars,  was 
not  passed  owing  to  the  heavy  burden  of  taxation  and  the 
desire  to  economize. 

This  lavish  expenditure  was  the  result  of  the  craze  for 
special  legislation  which  characterized  the  legislation  of 
the  period.  Of  974  laws  which  were  passed  and  received 
the  governor's  signature  in  1866,  "only  112  were  of  a 
general  character,  337  related  exclusively  to  private  in- 
terests, and  525  had  merely  a  local  bearing.  More  than 
one-half  of  these  bills  were  enacted  during  the  last  ten 
days  of  the  session."^ 

The  only  check  upon  the  legislative  appropriations  was 
the  refusal  of  the  comptroller  to  pay  them.  In  1870  he 
refused  to  pay  an  appropriation  "  For  the  improvement 
of  the  navigation  of  the  Bouquet  River."  And  the  court 
of  appeals  sustained  him  on  the  ground  that  it  violated 
article  i,  section  9,  of  the  constitution.  Regarding  this 
river  the  court  said  :  "  It's  name  is  not  found  on  any  gen- 
eral map  of  the  State.  Its  name  is  not  found  in  any 
general  history  of  the  country."  ^  Another  appropriation 
'*for  the  construction  of  a  bridge  across  the  Cattaragus 
Creek,  at  Upper  Irving,  near  the  Indian  Reservation, 
$10,000,"  was  also  held  to  be  unconstitutional.^     Guided 

^^.  /^.  Comptroller,  1864,  p.  30. 

'  Governor* s  Message,  1867,  p.  23. 

'  People  ex  rel.  Adsit  et  al.  v.  W.  F.  Allen,  Comptroller. 

*  People  ex  rel.  v.  Board  of  Supervisors  of  Chautauqua  County. 


234       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [558 

by  these  decisions  the  comptroller  refused  to  pay  $21,- 
000  of  appropriation  in  1870.' 

The  increased  burden  of  taxation  for  the  state  purposes 
added  to  the  rapidly  increasing  local  taxes  led  to  diffi- 
culties in  collecting  the  taxes.  Counties  were  tardy  in 
paying  over  the  amounts  due  the  state.  On  October 
I,  1861  there  was  due  from  county  treasurers  $1,125,923, 
which  should  have  been  paid  the  preceding  March.  In 
1873,  the  unpaid  taxes  due  from  county  treasurers 
amounted  to  $8,916,371,  of  which  nearly  $7,000,000  was 
due  from  New  York  City.  To  remedy  this  condition  of 
affairs  a  law  was  passed  making  the  tax  payable  April  i, 
and  directing  the  comptroller  to  charge  such  a  rate  of 
interest  on  unpaid  taxes  as  should  be  sufficient  to  pay 
back  all  expenses  incurred  by  the  state  in  borrowing 
money,  and  such  additional  rate  as  he  should  deem  proper. 
The  retention  of  moneys  in  the  hands  of  county  treas- 
urers, led  to  the  common  practice  of  loaning  these  sums 
out  at  interest;  thus  officials  made  a  profit  out  of  a  breach 
of  their  trusts.  When  invested  in  banks  they  were 
loaned  out  in  the  same  way.  In  1873,  it  was  provided 
that  every  county  should  pay  its  quota  of  state  taxes 
into  the  treasury,  one-half  on  or  before  April  15,  and 
the  other  half  on  or  before  May  i.  New  York  County 
was  one  of  the  worst  offenders,  and  in  1874  the  city 
comptroller  was  required  to  issue  revenue  bonds  so  that 
the  city  could  pay  the  state  its  quota  of  taxes. 

As  the  system  worked  out,  the  expenses  of  the  state 
were  from  six  months  to  a  year  in  advance  of  its  income. 
The  appropriation  bill  passed  in  April  or  May,  1880, 
would  go  into  effect  October,  1880  and  thus  the  appro- 
priations would  become  available  six    months    before  a 

^A.  R.  Comptroller,  1871,  p.  23. 


529]  MANAGEMENT  OF  FUNDS  235 

dollar  of  the  tax  was  paid  into  the  treasury,  since  the 
tax  was  not  due  to  be  paid  until  April  or  May,  1881. 
The  comptroller  was  therefore  embarrassed  by  large  and 
urgent  demands  upon  an  empty  treasury.  This  gave  rise 
to  the  serious  abuse  of  using  the  moneys  in  the  sinking 
funds  to  defray  the  current  expenses  of  the  government 
in  direct  violation  of  the  constitution. 

The  subterfuge  adopted  to  accomplish  this  result  was 
the  following :  The  legislature  authorized  the  comp- 
troller to  invest  surplus  moneys  belonging  to  the  capital 
of  the  sinking  funds  in  taxes  thereafter  to  be  collected, 
and  to  apply  these  moneys  to  meet  appropriations.  The 
money  appropriated  was  to  be  supplied  at  a  future  time 
by  taxation.  The  aggregate  amount  in  the  several  sink- 
ing funds  was  $15,594,951  in  1874.  On  inquiry  it  was 
found  that  nearly  two-thirds  of  this  amount  existed  only 
on  paper.^ 

In  1874  it  was  found  that  $3,988,526  of  the  money  be- 
longing to  the  General  Fund  Debt  Sinking  Fund  had 
been  expended  in  anticipation  of  taxes  and  of  the  $9,790,- 
072  belonging  to  the  Bounty  Debt  Sinking  Fund,  there 
was  actually  on  hand  only  $2,772,444,  and  $7,017,628  was 
invested  in  unpaid  taxes.  The  deficiencies  in  the  two 
funds  amounted  to  $1 1,000,000.  Taxes  were  immediately 
levied  to  meet  these  deficiencies  and  the  accounts  were 
adjusted  as  soon  as  possible,  and  an  amendment  to  the 
constitution  in  1874  provided  that  "the  sinking  fund  pro- 
vided for  the  payment  of  interest  and  extinguishment  of 
the  principal  of  the  debt  of  the  state,  should  be  separately 
kept  and  safely  invested,  and  neither  of  them  should  be 
appropriated  or  used  in  any  manner  other  than  the  spe- 
cific purpose  for  which  they  were  provided.* 

^Senate  Documents,  1874,  No.  29.  *Art.  7,  Sec.  13. 


236       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [560 

The  old  plan  of  using  the  moneys  in  the  various  trust 
funds  to  carry  on  the  work  of  the  state  now  became  a 
settled  policy  and  large  balances  belonging  to  the  trust 
funds  were  allowed  to  accumulate  in  the  treasury.  The 
law  required  these  to  be  invested,  however,  and  the 
general  fund  was  thus  required  to  pay  as  high  as  six 
per  cent  interest  upon  these  funds  as  long  as  it  kept 
them  there  uninvested.  It  was  argued  that  the  payment 
out  of  these  trust-fund  balances  was  the  temporary  in- 
vestment of  the  funds  in  a  tax  levy.  The  amount  thus 
retained  amounted  to  over  $2,000,000  in  1878,  and  the 
interests  paid  by  the  General  Fund  the  same  year  amounted 
to  $147,622.  The  total  amount  of  interest  paid  by  the 
General  Fund  for  the  ten  years  1873-1882  for  amounts 
borrowed  from  all  trust  funds  was  $1,433,338.^  This 
plan  was  continued  until  the  comptroller  was  empowered 
to  issue  revenue  bonds  in  anticipation  of  taxes. 

During  the  thirty  years  1880  to  1909  the  comptroller 
had  to  resort  frequently  to  temporary  loans  in  the  form 
of  revenue  bonds  to  carry  on  the  government.  The 
General  Appropriation  Bill  items  became  payable  Oc- 
tober 1st  of  the  same  year  in  which  it  was  passed.  The 
Supply  and  Supplemental  Supply  bill  or  special  bills  be- 
came payable  as  soon  as  the  governor  signed  them. 
The  increasing  use  of  the  supply  bills  not  only  gave  away 
large  sums  of  money  without  mature  consideration  at  the 
hands  of  the  legislature,  but  complicated  the  fiscal  situ- 
ation by  making  payable  appropriations  some  months  be- 
fore the  money  could  be  collected  from  the  tax  levy,  since 
the  first  installment  of  the  state  tax  was  not  received 
until  February  15,  following  the  legislative  session.  In 
1912  the  General  Appropriation  Bill  amounted    to  $28, 

^A.R.  Comptroller,  1883,  p.  13. 


56l]  MANAGEMENT  OF  FUNDS  237 

106,576,  the  Supply  Bill  to  $3,632,852,  and  special  bills 
to  $20,627,154,215/  The  Higgin's  Bill  passed  in  1899 
(Chap.  580)  which  prohibited  departments  and  institution 
from  incurring  indebtness  in  excess  of  appropriations 
was  designed  to  render  large  supply  bills  unnecessary  in 
the  future.  In  1899  the  state  had  to  pay  3S  per  cent 
and  4  per  cent  interest  on  the  $2,000,000  borrowed  that 
year.  During  the  decade  1891  to  1900  the  state  borrowed 
$9,000,000  for  current  purposes. 

The  development  of  the  new  system  of  taxation  in  the 
state,  the  so-called  indirect  taxes  has  had  a  marked  influ- 
ence upon  the  financial  operations.  The  taxes  levied 
upon  corporations  are  payable  at  various  times  through- 
out the  year,  as  for  example  the  tax  on  transportation 
companies  is  payable  on  August  i,  the  tax  on  insurance 
companies  is  payable  on  June  i,  and  the  tax  on  trust 
companies  and  saving  banks  is  payable  on  September  i. 
The  receipts  from  the  mortgage  tax,  stock  transfer,  and 
inheritance  tax  are  distributed  throughout  the  year.  A 
proper  adjustment  of  the  dates  for  paying  these  various 
taxes  might  be  made  to  make  the  receipts  payable  at  the 
time  when  the  treasury  experiences  the  greatest  strain 
on  its  revenues.  In  this  way  borrowing  might  be  mini- 
mized in  the  future.  Recent  changes  in  the  dates  of 
assessment  and  taxation  have  been  secured  in  the  New 
York  City  administration  for  the  purpose  of  securing 
revenue  earlier  in  the  year  and  thus  reducing  the  amount 
of  borrowing  by  the  city  and  resulting  in  a  saving  in 
interest. 

Furthermore,  during  the  decade  1901-1910  the  reve- 
nues from  the  indirect  sources  so  increased  as  to  leave 
an  excess  of  revenue  over  expenditures  inclusive  of  sink- 

^Idid.,  1913,  p.  103,  215. 


238       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [562 

ing  fund  contributions  for  every  year  except  1904,  1905 
and  1909,  and  the  cash  surplus  of  the  state  varied  be- 
tween $6,363,131  in  I90[  to  $15,285,839  in  1909. 

From  1906  to  1910  no  direct  state  tax  was  levied  and 
the  annual  contributions  to  the  Canal  Debt  Sinking  Fund 
were  provided  for  by  appropriating  the  sums  out  of  the 
General  Fund.  In  1902  the  annual  contribution  to  the 
free  School  Fund,  which  had  formerly  been  raised  by  a 
special  tax,  was  made  a  charge  on  the  General  Fund. 
The  aggregate  amount  spent  for  this  purpose  from 
1902-1910  amounted  to  $34,925,201.  In  1907  the 
annual  contributions  to  the  highway  improvement  sink- 
ing fund  debt  were  made  a  charge  upon  the  General 
Fund.  These  payments  and  the  increased  appropria- 
tions wiped  out  the  large  surplus  of  former  years  and 
made  it  necessary  in  191 1  to  resort  again  to  a  direct  tax 
on  the  real  and  personal  property  of  the  state.  The 
tax  imposed  was  six-tenths  of  a  mill. 

The  annual  interest  and  sinking  fund  charges  will  in- 
crease to  about  $8,500,000  in  1914,  and  as  the  receipts 
from  special  taxes  will  hardly  increase  faster  than  ordi- 
nary expenses,  it  seems  likely  that  the  direct  state  tax  will 
have  to  be  continued  for  some  years. 

The  burden  of  a  direct  tax  will  be  inconsiderable, 
since  with  an  assessed  valuation  of  approximately 
$10,000,000,000,  each  million  may  be  raised  by  a  tax 
amounting  to  but  ten  cents  on  every  thousand  dollars, 
and  furthermore  the  moral  effect  of  a  direct  tax  may 
result  in  a  saving  in  appropriations  of  as  much  as  the 
amount  raised  by  the  tax  levy  itself.' 

M.  i?.  Comptroller,  1911,  p.  10. 


-63]  MANAGEMENT  OF  FUNDS  239 

Administration   Officials 

The  comptrollers  of  the  state  have  for  the  most  part 
been  men  of  unusual  ability,  and  their  reports  are  teem- 
ing with  suggestions  for  improvements  which  have  too 
often  passed  unheeded  by  the  legislature.  Time  and 
again  the  comptrollers  have  pointed  out  improvements 
which  if  they  had  been  acted  upon  would  have  saved 
the  state  thousands  of  dollars  in  money  and  in  nearly 
every  case  would  have  been  to  the  best  interest  of  the 
state. 

In  some  cases  the  same  suggestions  have  been  re- 
peated year  after  year  by  successive  comptrollers — in  one 
case,  dealing  with  the  U.  S.  Deposit  Fund,  for  thirty 
years — before  any  action  was  taken  by  the  legislature. 

Comptroller  Flagg,  who  held  office  continuously  from 
1832  to  1842,  with  the  exception  of  one  term,  was  one  of 
the  great  comptrollers  of  the  state.  He  pleaded  in  vain 
against  using  the  capital  of  the  General  Fund  for  defray- 
ing current  expenses,  and  again  and  again  pointed  out 
the  necessity  of  imposing  a  tax  to  meet  expenses.  His 
masterly  criticism  of  the  famous  Ruggles  plan  for  incur- 
ring a  debt  of  forty  millions  of  dollars  for  canal  improve- 
ment, which  has  been  fully  described  elsewhere,  was  one 
of  the  great  financial  documents  of  the  state.  Comp- 
troller Robert's  reports  in  the  nineties,  dealing  with  the 
break-down  of  the  old  general  property  tax  and  arguing 
for  the  newer  forms  of  special  or  indirect  taxes,  and 
especially  a  graduated  income  tax  and  the  separation  of 
state  and  local  revenues,  are  noteworthy  documents. 
The  splendid  reports  of  Comptroller  Williams  mark  a 
new  epoch  in  the  financial  history  of  the  state. 

The  character  and  volume  of  the  business  transacted  by 
the  comptroller's  office  has  so  increased  as  to  require  the 


240       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [564 

establishment  of  separate  bureaus,  and  the  number  of 
employees  has  increased  from  a  single  official  in  1797  to 
245  persons  in  1910.  The  annual  receipts  and  expendi- 
tures have  grown  from  that  of  a  few  hundred  thousand 
dollars  to  that  of  thirty-nine  millions,  but  more  important 
is  the  fact  that  within  the  last  ten  years  the  volume  of 
treasury  transactions  has  increased  by  more  than  100  per 
cent.  The  official  signature  must  be  signed  by  the  comp- 
troller and  his  regular  deputies  not  less  than  125,000 
times  during  each  year.'  A  branch  office  in  charge  of  a 
deputy  comptroller  is  maintained  in  New  York  City  for 
the  benefit  of  the  citizens  of  this  district,  and  the  two 
offices  are  kept  informed  regarding  business  transactions 
by  means  of  complete  daily  reports  and  the  exchange  of 
bulletins. 

The  work  of  the  department  is  divided  among  the  fol- 
lowing bureaus:  The  Finance  Bureau,  Canal  Bureau, 
Land  Bureau,  Auditor's  Bureau,  Corporation  Tax  Bureau, 
Transfer  Tax  Bureau,  Stock  Transfer  Bureau,  Municipal 
Accounts  Bureau,  Court  and  Trust  Fund  Examiners,  Li- 
censes Bureau  and  Detective  Agents.  The  work  per- 
formed by  these  bureaus  has  already  been  described. 

Only  one  serious  breach  of  trust  among  the  financial 
officials  has  occurred  during  the  history  of  the  state. 
During  the  year  1873  Charles  H.  Phelps,  one  of  the 
clerks  in  the  treasurer's  office,  defaulted  to  the  amount 
of  $304,957.91.  No  one  else  was  involved  in  the  matter. 
The  amount  needed  to  cover  the  defalcation  was  raised 
by  taxation  by  adding  ttV  mills  to  the  tax  rate.'' 

Supervision  of  Public  Accounts. — One  of  the  most 
hopeful  tendencies  to  be  noticed  in  New  York  State  in 

M.  /?.  Comptroller,  1911,  p.  69. 
^Laws,  1874,  Chap.  417. 


565]  MANAGEMENT  OF  FUNDS  241 

recent  years  is  the  rigid  supervision  over  all  officers  who 
have  to  do  with  the  management  of  public  money.  This 
tendency  is  due  partly  to  the  higher  moral  standard 
upon  which  we  now  insist  in  dealing  with  public  affairs, 
and  partly  to  the  realization  of  the  fact  that  much  of  the 
loss  and  waste  in  the  management  of  public  affairs  is  due 
to  crude  and  inefficient  systems.  We  are  coming  to  re- 
alize that  many  of  the  mistakes  of  the  past  have  been  due 
not  to  dishonesty,  but  to  sheer  ignorance  and  ineffi- 
ciency. The  fact  that  the  duties  and  burdens  placed 
upon  county  treasurers  and  local  officials  have  been 
steadily  increasing  in  importance  has  forced  the  state  to 
exercise  a  closer  supervision  over  them.  The  county 
treasurers  have  now  become  the  collectors  of  the  state 
and  school  taxes,  the  excise  and  inheritance  taxes,  and 
court  and  trust  funds,  involving  the  supervision  over  hun- 
dreds of  thousands  of  dollars  of  state  funds.  The  defal- 
cation of  a  single  county  treasurer  becomes  a  more 
serious  matter  than  was  the  case  when  revenues  were 
small.  Furthermore,  the  economies,  which  appear  small 
in  particular  instances,  become  of  vast  importance  when 
carried  into  effect  uniformly  throughout  the  whole  fiscal 
system. 

The  inadequacy  of  the  old  system  of  collection  and  ac- 
counting first  became  apparent  when  the  collection  of  the 
inheritance  tax  was  intrusted  to  the  county  treasurers. 
It  was  soon  discovered  that  through  the  laxity  of  these 
officials  the  state  was  losing  annually  thousands  of  dol- 
lars. In  fifteen  counties  the  collection  was  taken  out  of 
the  hands  of  the  local  officials  and  placed  in  the  hands  of 
salaried  appraisers.  The  examination  conducted  at  this 
time  revealed  the  enormous  losses  resulting  from  the  old 
system,  and  brought  to  light  expecially  the  laxity  of  ad- 
ministration of  trust  funds  paid  into  the  courts  of  record. 


242        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [366 

Courts  and  Trust  Funds. — In  1892  the  comptroller 
was  given  supervision  over  all  these  court  and  trust 
funds.  The  money  was  to  be  deposited  in  depositories 
chosen  by  the  comptroller  and  the  county  treasurers  were 
required  to  render  accounts  to  the  comptroller  and  ac- 
cumulations which  had  remained  in  their  hands  for  a 
period  of  twenty  years  were  to  be  paid  into  the  state 
treasury. 

The  investigation'  brought  to  light  glaring  irregu- 
larities. In  33  counties  defalcation  or  shortage  had  oc- 
curred within  recent  years.  In  some  cases  no  separate 
account  had  been  kept  with  reference  to  court  trust 
funds.  Money  arriving  from  different  actions  was  kept 
in  a  common  fund.  Loans  on  mortgages  were  taken  in 
excess  of  60  per  cent,  of  the  value  of  the  property,  and 
in  some  cases  in  excess  of  the  fair  market  value  of  the 
property,  and  mortgages  were  often  not  accompanied 
with  an  abstract  of  the  title.  It  was  not  uncommon  for 
the  county  treasurers  to  retain  a  portion  of  the  interest 
collected.  The  situation  was  a  serious  one,  since  the 
greater  part  of  such  moneys  belonged  to  widows,  orphans 
and  incompetents,  and  in  many  cases  represented  their 
sole  support. 

In  1901  the  comptroller  was  required  to  examine  the 
county  treasurers'  books  once  a  year,  and  by  1903  the 
department  succeeded  in  making  an  examination  of  the 
court  and  trust  funds  in  every  county  of  the  state.  The 
chief  abuses  and  losses  sustained  by  beneficiaries  were 
due  to  the  following  causes:  (i)  defalcation  of  county 
treasurers;  (2)  poor  and  unauthorized  investments;  (3) 
where,  by  special  direction  of  the  courts,  funds  were  paid 
into  banks  and  trust  companies  not  designated  by  the 
comptroller  many  accounts  were  not  credited  with  any 
interest,  or  a  smaller  rate  was  paid  than  other  deposit- 


c^^y-j  MANAGEMENT  OF  FUNDS  243 

ors  received ;  (4)  these  companies  were  not  required 
to  give  security;  (5)  funds  were  invested  in  bonds  and 
mortgages  at  4}^  per  cent  interest  and  only  3  per  cent, 
was  allowed  to  the  account;  (6)  prior  to  1889  the  New 
York  City  chamberlain  had  used  the  court  funds  to  pay 
traveling  expenses  of  the  officers  of  the  court  and  for 
stationery  and  postage;  (7)  for  years  the  first  three 
months'  interest  had  been  diverted  to  other  purposes 
and  tfie  difference  between  the  simple  and  compound  in- 
terest was  also  diverted ;  (8)  certain  beneficiaries  whose 
funds  had  been  lost  on  account  of  poor  investments  were 
paid  out  of  other  court  funds  which  belonged  to  other 
persons.  The  examinations  further  showed  that  the 
county  clerks  and  surrogate  clerks  had  failed  in  many 
cases  to  enter  in  their  books  a  record  of  money  directed 
to  be  paid  into  court.  Administrators  and  guardians, 
directed  to  pay  money  to  the  county  treasurer,  had 
withheld  it.  In  discussing  this  point  the  comptroller 
wrote  in  1905  :  "  It  is  a  regrettable  fact  that  practically 
every  county  in  the  state  has  furnished  within  the  past 
year  one  or  more  instances  of  money  improperly  with- 
held by  referees  .  .  .  and  the  interest  which  would  have 
been  earned  had  the  money  been  properly  deposited  is 
lost."^ 

In  1908  the  power  of  the  comptroller  was  increased. 
He  was  given  power  to  compel  banks  and  trust  com- 
panies to  transfer  court  funds  to  county  treasuries.  The 
court  was  forbidden  to  direct  the  payment  to  any  bank 
which  was  not  an  authorized  depository.  Trust  com- 
panies designated  as  depositories  were  required  to  file 
bonds.  Referees  were  required  to  pay  money  to  the 
county  treasurer  or  city  chamberlain.     County  treasurers 

M.  /?.  Comptroller,  1905,  XIV. 


244       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [568 

were  required  to  register  in  a  special  book  all  money 
paid  in  response  to  the  order  of  the  court  under  penalty 
of  $250  fine.  Each  county  and  the  city  of  New  York 
was  made  responsible  for  all  funds  deposited  with  the 
treasurer  or  the  chamberlain.  A  uniform  system  of 
keeping  the  accounts  was  installed  and  is  now  in  use  in 
all  the  counties. 

State  and  national  banking  institutions  are  designated 
as  depositories,  with  two  exceptions,  and  the  amount  of 
deposits  in  any  one  institution  is  limited  to  25  per  cent. 
of  its  assets;  the  total  amount  of  such  funds,  under  the 
supervision  of  the  comptroller,  is  about  $7,000,000,  of 
which  amount  about  one-third  is  invested,  and  the  re- 
mainder is  on  deposit.  It  is  necessary  to  keep  a  large 
amount  on  deposit  owing  to  the  constant  withdrawals 
which  are  being  made. 

The  department  employs  for  this  work  eight  exam- 
iners, who  receive  a  per  diem  salary  of  $8  to  $12. 
During  the  year  1910  there  was  paid  into  the  treasury 
$270,591  of  money  which  had  remained  in  the  hands  of 
the  county  treasuries  for  over  twenty  years.  For  a 
number  of  years  the  city  chamberlain  of  New  York  re- 
fused to  comply  with  this  provision  of  the  law,  but  the 
matter  has  now  been  adjusted. 

Municipal  Accounting. — In  1905  a  comprehensive  law 
was  passed  giving  the  comptroller  control  over  nearly  all 
the  local  financial  officers.  It  provided  that  all  counties 
in  the  state  (excepting  the  city  of  New  York),  the 
comptrollers  of  cities  of  the  second  and  third  classes,  and 
the  treasurers  of  all  villages  having  a  population  of  three 
thousand  or  more,  should  annually  make  a  report  of  the 
financial  conditions  to  the  comptroller.  It  also  author- 
ized an  examination  of  the  accounts  of  these  officers.  A 
new  section  to  the  law  passed  in  191 1  provided  for  the 


569]  MANAGEMENT  OF  FUNDS  245 

collection  of  statistical  information  relative  to  taxation, 
revenue  and  debt  of  all  municipalities  within  the  state. 
This  will  provide  accurate  figures  of  local  receipts  and 
expenditures. 

It  was  found  that  the  system  in  operation  ranged  from 
that  of  practically  no  system  at  all,  to  a  complicated 
double  entry  system  of  book-keeping.  In  many  cases  it 
was  impossible  to  interpret  the  records  of  the  previous 
officers,  and  in  other  cases  a  detailed  report  could  not 
be  made  as  bills  were  paid  on  the  order  of  the  clerk  and 
the  board  of  supervisors,  and  the  order  did  not  state 
the  purpose  of  the  payment.  Furthermore,  the  superin- 
tendent of  the  poor  audited  and  paid  all  bills  against  the 
county  for  charitable  purposes  from  a  fund  appropriated 
for  that  purpose.  It  became  apparent  that  the  best 
results  could  be  obtained  by  installing  a  uniform  system 
of  accounting  for  each  class  of  municipality.  There  were 
57  counties,  seven  comptrollers  for  second  class  cities, 
36  comptrollers  and  treasurers  in  third  class  cities,  and 
69  treasurers  in  villages,  and  the  force  of  examiners 
in  1907  consisted  of  ten  men.  It  was  found  that  the 
amount  improperly  and  illegally  expended  annually  ranged 
from  2i  to  16  per  cent  of  the  total  amount  expended  by 
the  county  government.  The  principal  purposes  for 
which  illegal  expenditures  were  incurred  were  (i)  com- 
pensation and  expenses  of  members  of  boards  of  super- 
visors ;  (2)  compensation  and  expenses  of  county  officials 
and  their  assistants ;  and  (3)  printing  and  publishing. 
The  investigations  into  the  affairs  of  the  county  treasury 
revealed  an  astonishing  condition.  It  was  found  that 
the  money  was  being  disbursed  absolutely  contrary  to 
law ;  this  was  due  largely  to  the  fact  that  the  local  offi- 
cials followed  precedent  rather  than  the  law.  County 
money  was  loaned  to  private  individuals  or  used  by  the 


246       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [570 

officials  in  paying  their  private  bills.  Illegal  payments 
were  made  to  coroners  and  sheriffs.  Connty  treasurers 
illegally  retained  fees.  Boards  of  supervisors  were  inex- 
cusably lax  in  the  auditing  of  bills  and  many  bills  were 
paid  before  they  were  audited.  Superintendents  of  the 
poor  kept  no  accounts  at  all.  Depositories  paid  only  i 
per  cent  on  deposits,  but  charged  the  county  3  per  cent 
on  all  sums  borrowed.  On  account  of  the  improper 
methods  of  book-keeping,  and  disregard  of  statutes,  the 
city  of  Albany  was  escaping  its  share  of  the  county  tax 
and  it  owed  the  county  nearly  $300,000.  County  funds 
were  not  always  protected  by  depository  bonds.  Taxes 
were  improperly  levied,  and  great  laxity  was  apparent 
in  the  matter  of  collecting.  In  Onondago  County  a 
bank  at  Syracuse  performed  all  the  functions  of  the  county 
treasurer,  and  had  in  three  years  retained  over  $50,000 
in  fees.  Illegal  use  of  sinking  funds  existed  in  the 
village  of  Watkins.  Widespread  laxity  of  administration 
prevailed  everywhere  throughout  the  state.  Extrava- 
gance, confusion  and  carelessness,  as  well  as  wilful  disre- 
gard of  the  law  prevailed. 

The  comptroller  concluded  that  nearly  all  the  irregu- 
larities were  "  primarily  due  to  the  failure  on  the  part  of 
the  various  boards  of  supervisors  to  perform  the  duties 
with  which  they  are  charged  by  law,  especially  with  refer- 
ence to  the  audit  of  accounts  and  claims  against  their  re- 
spective counties.'  The  best  solution  of  this  problem  is 
to  take  away  from  the  boards  of  supervisors  their  power 
of  audit  over  county  accounts  and  give  such  power  to  an 
officer  who  should  be  known  as  the  county  auditor  or 
comptroller,  and  whose  duties  relative  to  county  finances 
should  be  similar  to  those  of  the  state  comptroller  with 

^A.  R.  Comptroller,  1909,  XLVI. 


^71  ]  MANAGEMENT  OF  FUNDS  247 

the  finances  of  the  state."  Most  of  the  counties  now 
have  a  county  auditor.  Since  the  board  of  supervisors 
met  only  once  a  year,  bills  which  became  due  immedi- 
ately after  the  meeting  could  not  legally  be  paid  until  the 
next  meeting  of  the  board,  and  thus  cfeditors  of  the 
county  were  not  promptly  paid. 

The  department  now  employs  15  examiners  and  as 
many  more  are  needed  to  do  the  work.  The  number  of 
municipalities  to  be  examined  is  549,  consisting  of  57 
counties,  46  cities  and  446  incorporated  villages.  The 
methods  employed  are  to  cooperate  with  local  officials 
by  suggesting  methods  of  improvement,  and  by  giving 
assistance  in  the  installation  of  new  systems  of  account- 
ing. Instructions  as  to  the  proper  procedure  in  the 
levying  of  taxes  and  as  to  the  proper  methods  to  be  em- 
ployed in  auditing  accounts  have  been  prepared  and  sent 
to  each  board  of  supervisors.  Instructions  relative  to 
keeping  accounts  have  been  sent  to  the  various  officials. 
Forms  for  the  tax  levy,  for  the  annual  appropriations, 
and  for  the  annual  reports  have  been  sent  to  the  county 
treasurers. 

The  immediate  value  of  the  work  to  the  taxpayers  is 
evident  from  the  following  results  :  in  Nassau  County 
$40,000  has  already  been  returned  to  the  county  on  ac- 
count of  former  defalcations ;  in  Schenectady  County 
more  than  $13,000  has  been  returned  to  the  treasury; 
Rensselaer,  Schuyler  and  Oswego  counties  have  each  re- 
ceived $2,000  which  has  been  returned  by  former  offi- 
cials. But  more  important  than  these  immediate  gains 
is  the  fact  that  the  improper  and  illegal  practices  have 
been  stopped,  which  will  result  in  the  saving  of  thou- 
sands of  dollars  to  taxpayers,  and  in  raising  the  moral 
tone  of  political  activity. 

Bureau    of  Audit. — In    August,    1910,    a    Bureau    of 


248       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [572 

Audit  was  established  in  the  comptroller's  office.  The 
first  audit  made  was  that  of  the  books  of  the  Department 
of  Public  Buildings.  Next  an  examination  was  made 
into  the  common  school  investments,  termed  bonds  for 
land.  The  differences  between  the  actual  balances  on  the 
ledger  and  the  balance  of  principal  supposed  to  be  in- 
vested amounted  to  $26,495.  In  many  cases  no  payment 
of  either  principal  or  interest  had  been  made  for  years, 
and  in  other  cases  the  evidences  of  the  transactions  were 
missing  altogether. 

Uniform  systems  of  accounts  were  devised  and  in- 
stalled for  the  state  prisons  and  for  the  Forest,  Fish  and 
Game  Commission.  Systems  were  worked  out  for  the 
accounts  of  the  national  guard  and  naval  militia,  and  in 
time  a  wise  co-ordination  will  be  established  between  the 
comptroller's  department  and  the  other  departments  under 
his  control. 

The  Budget. — Governor  Hughes  in  his  annual  message 
in  1910  recommended  the  passage  of  an  act  to  insure 
publicity  with  respect  to  the  demands  upon  the  state, 
and  to  facilitate  the  work  of  legislative  committees  in 
dealing  with  questions  of  appropriations.  This  sugges- 
tion was  embodied  into  a  law  early  in  the  session.'  This 
law  provided  that  on  or  before  November  15th  of  each 
year  each  state  officer  or  head  of  department  should  file 
with  the  comptroller  a  statement  in  detail  of  all  money 
for  which  a  general  or  special  appropriation  was  desired 
at  the  ensuing  session  of  the  legislature,  together  with 
the  reasons  therefor.  From  these  reports  the  comp- 
troller was  to  make  up  the  annual  budget.  The  first 
budget  was  presented  to  the  legislature  in  January, 
191 1.     It  contained,  first,  an  itemized  statement  of  the 

^  Finance  Law ^  ch.  149. 


373]  MANAGEMENT  OF  FUNDS  249 

actual  expenditures  made  during  the  preceding  year; 
second,  a  statement  of  the  appropriations  made  for  the 
preceding  year ;  and  third,  a  statement  of  the  appropria- 
tions desired  for  the  coming  year.  These  desired  appro- 
priations were  summarized  under  the  following  schedules : 
Schedule  A,  for  salaries  and  services  (including  wages 
of  laborers);  Schedule  D,  for  general  expenses  and  office 
equipment ;  Schedule  E,  for  maintenance ;  Schedule  F, 
for  permanent  outlays ;  Schedule  G,  for  miscellaneous 
purposes ;  Schedules  B  and  C  furnished  statistical  infor- 
mation concerning  the  number  of  regular  and  temporary 
employees ;  Schedule  H  gives  the  portions  of  appropria- 
which  will  lapse  within  the  next  two  years.  This  is  neces- 
sary because,  according  to  the  constitution,  appropria- 
tions only  run  for  two  years.  Schedule  I  gives  the 
estimated  appropriations  which  will  remain  unexpended 
at  the  close  of  the  fiscal  year.  Comments  upon  the  im- 
portant items  and  variations  are  stated  quite  fully  in  the 
last  column. 

The  comptroller's  report  for  the  year  1910  is  such  an 
improvement  upon  former  reports  as  to  constitute  the 
beginning  of  a  new  era  in  fiscal  accounting  in  this  state. 
Prior  to  this  date  the  expenditures  were  given  for  each 
division  of  the  government  with  little  attempt  at  classi- 
fication. The  books  contained  no  controlling  accounts 
for  appropriations,  lapses  thereof,  bonds  or  sinking  fund 
obligations.  Beginning  in  this  year  a  standard  classifi- 
cation of  expenditures  was  adopted  and  the  subdivisions 
of  the  government  were  grouped  under  fourteen  main 
heads,  and  under  each  subdivision  items  were  given  in 
detail. 

Based  upon  this  standard  classification,  a  condensed 
comparative  statement  of  the  receipts  and  expenditures 
is  given  for  the  years  1881 — 1910.     A  balance  sheet  has 


250       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [574 

been  issued  monthly  since  September  30,  1910,  and 
weekly  bulletins  have  been  issued  giving  the  appoint- 
ments made  during  the  week,  the  list  of  licenses  issued 
to  private  detectives,  and  the  appointment  of  all  deposi- 
tories of  state  funds. 

Besides  these  reforms  in  accounting  and  methods  of 
presenting  the  annual  report,  other  changes  have  been 
inaugurated.  In  order  to  insure  the  safety  of  state  funds 
on  deposit,  it  was  decided  not  to  accept  personal  sure- 
ties, but  to  require  either  the  deposits  of  state  bonds,  or 
the  bond  of  a  surety  company.  The  following  definite 
policy  for  the  administration  of  state  funds  was  adopted : 
state  depositories  are  limited  to  those  institutions  whose 
surplus  and  undivided  profits  exceed  20  per  cent  of  the 
share  of  capital ;  the  amount  of  state  funds  deposited  will 
be  limited  to  25  per  cent  of  their  capital  surplus  and  un- 
divided profits ;  preference  will  be  given  to  state  and 
national  bank  institutions,  depositing  state  bonds  as  secur- 
ity. The  result  of  this  policy  has  been  to  broaden  the 
market  for  state  bonds.  The  payment  of  3  per  cent  in- 
terest is  insisted  upon  for  reserve  accounts. 

The  first  conclusion  to  be  drawn  from  this  part  of  our 
study  is  that  the  legislature  has  been  chiefly  responsible 
for  the  mistakes  of  the  past,  and  that  it  has  hindered 
rather  than  advanced  the  efficient  and  economical  man- 
agement of  the  state  finances.  It  has  paid  too  little 
heed  to  the  recommendations  of  the  administrative  offi- 
cers, who,  through  experience  and  intimate  knowledge  of 
the  needs  of  their  departments,  were  best  qualified  to 
make  suggestions  for  improvement.  The  recommenda- 
tions of  the  administrative  officials  have  in  nearly  every 
case  been  to  the  best  interest  of  the  state,  and  whenever 
large  powers  have  been  granted  to  these  officials,  as  in 
the  administration  of  the  corporation  laws,  these  powers 


^-r^]  MANAGEMENT  OF  FUNDS  25 1 

have  been  properly  used  and  not  abused.  A  closer  co- 
ordination between  the  legislative  and  administrative  de- 
partments is  highly  desirable  and  urgently  needed. 

Secondly,  a  complete  reorganization  of  the  administra- 
tive and  accounting  procedure  in  the  comptroller's  de- 
partment is  urgently  demanded.  The  comptroller  is 
responsible  for  passing  on  all  financial  relations  of  the 
state,  and  yet  under  the  present  system  he  is  entirely  de- 
pendent upon  the  personal  fidelity  of  the  various  ad- 
ministrative officials  in  his  work  of  auditing  accounts. 
He  must  accept  the  audit  of  the  department  heads.  It 
was  testified  before  the  recent  State  Department  Investi- 
gating Committee  that  more  than  $29,000,000  of  the 
general  fund  expenditure  is  not  audited  by  the  chief 
financial  officer;  that  the  Educational  Department,  the 
Hospital  Commission,  the  Agricultural  Department  and 
the  Highways  Commission  audit  their  own  accounts  and 
send  the  vouchers  to  the  comptroller,  who  accepts  them, 
provided  the  appropriation  laws  authorize  such  expendi- 
ture.' 

The  annual  report  of  the  comptroller  for  1912  empha- 
sizing this  point  says:  ''The  records  and  accounts 
which  are  made  of  these  large  expenditures  disclose  the 
accuracy  and  honesty  of  the  receipts  and  payments,  but 
offer  no  data  from  which  to  determine  the  justification  or 
relative  worth  of  these  expenditures."*  Such  informa- 
tion can  only  be  acquired  by  installing  a  system  of  ac- 
counting, showing  revenues  and  expenses  in  addition  to 
the  present  system,  which  shows  only  receipts  and  dis- 
bursements. 

He  recommends  "  that  the  legislature  authorize   the 

^JVew  Yofk  Times,  Friday,  January  9,  1913. 
^A.  R.  Comptroller,  1913,  XXXIII. 


252        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [576 

comptroller  to  formulate  a  plan  for  the  equipment  and 
organization  of  an  auditing  department  which  shall  be 
capable  of  a  thorough  examination  and  audit  of  the  ac- 
counts of  all  parts  of  the  state  government." ' 

An  amendment  to  the  finance  law  in  1913  provides 
that  a  duplicate  of  every  invoice  shall  be  delivered  to  the 
comptroller  at  the  same  time  it  is  sent  to  the  department 
receiving  the  supplies.  This  will  give  the  comptroller 
some  basis  for  auditing  vouchers,  but  in  addition  he 
should  be  supplied  with  a  copy  of  the  original  order  and 
should  have  an  inspection  force  at  work  to  ascertain 
whether  the  goods  purchased  are  satisfactory  as  to 
quality  and  quantity  before  payment  is  made.  The  law 
further  provides  that  contracts  exceeding  $1,000  in 
amount  shall  be  approved  by  the  comptroller.  He  is 
also  given  power  to  prescribe  the  form  of  accounts  to  be 
observed  in  all  state  institutions.  This  is  a  long  stride 
in  advance,  but  the  benefits  to  be  derived  from  an  up-to- 
date  accounting  system  will  be  lost  unless  the  knowledge 
gained  thereby  is  made  use  of  in  the  preparation  of  the 
annual  budget. 

A  board  of  estimate  consisting  of  the  governor,  lieu- 
tenant-governor, president  pro  tempore  of  the  senate, 
the  chairman  of  the  finance  committee  of  the  senate,  the 
speaker  of  the  assembly,  the  chairman  of  the  ways  and 
means  committee  of  the  assembly,  the  comptroller,  the 
attorney  general  and  the  commissioner  of  efficiency  and 
economy  has  been  created^  to  prepare  the  annual  budget. 
The  minutes  of  this  board  are  a  public  record  and  are 
open  at  all  times  to  public  inspection.  Public  hearings 
may  be  held  but  they  are  not  mandatory.     Departmen- 

^A,  R.  Comptroller,  1913,  XXXIII. 
^  Laws  1913,  Chap.,  281. 


577]  MANAGEMENT  OF  FUNDS  253 

tal  hearings  are  granted  to  officers  to  explain  their 
requests  and  to  offer  data  in  support  of  them.  It  remains 
to  be  seen  whether  this  board  will  exercise  a  rigid  super- 
vision over  requests  for  appropriations  and  will  make  the 
budget  a  comprehensive,  well  planned,  scheme  for  carry- 
ing on  the  activities  of  the  state  or  whether  it  will  merely 
perform  the  functions  formerly  exercised  by  the  ways  and 
means  committee  of  the  assembly  and  the  finance  com- 
mittee of  the  senate  and  perform  these  functions  in  the 
same  way  they  have  been  performed  for  years. 


CHAPTER  XI 

State  Funds 

The  General  Fund 

The  General  Fund  in  1789  consisted  of  the  state  lands,  a 
considerable  amount  of  cash  and  securities  acquired  through 
the  operation  of  the  Funding  Act  of  Congress  and  the  ordi- 
nary revenues.  It  was  expected  that  the  annual  revenue 
would  be  more  than  sufficient  to  pay  all  the  ordinary  ex- 
penses of  the  government  for  many  years.  Unfortunately, 
however,  the  fund  was  so  badly  managed  that  by  1835  noth- 
ing remained  except  the  ordinary  revenues,  which  consisted 
of  the  amounts  raised  from  direct  and  indirect  taxes. 

In  order  to  understand  the  composition  and  management 
of  this  fund  a  short  account  must  be  given  of  the  operation 
of  the  Funding  Act  of  Congress,  since  the  amounts  received 
from  this  source  became  a  part  of  this  fund. 

State  Debt  and  Funding  Act  of  Congress. — The  Funding 
Act  of  1790  was  a  boon  no  less  to  the  various  states  than  to 
the  national  government.  The  states,  when  they  entered  the 
Union,  brought  with  them  a  burden  of  indebtedness  which 
had  largely  been  acquired  through  their  efforts  in  the  com- 
mon struggle  for  independence.  The  debt  of  New  York 
State  consisted  of  a  confused  mass  of  certificates,  dating 
back  as  far  as  1780,  and,  as  finally  adjusted  by  the  secretary 
of  the  treasury,  amounted  to  $1,167,575.25.^ 

1  Statement  of  Debt  of  New  York  State  in  I78p. 
254  [578 


579]  STATE  FUNDS  255 

Principal  Interest 

£  s  d  £       s   d 
Certs,  for  moneys  loaned  pursuant  to 

Act  of  1788  III  13  3  78  14  5 

do.            do.          Act  of  1780  741  6  o  472  10  9 

For  horses  bought  1780 904  5  o  515    8  5 

For  depreciation  of  pay  to  Aug.  1780  54,520  i  7  25,669  17  4 

Army  pay  for  1781  I7,972  6  9  8,626  14  o 

Pensions  to  Officers  8,104  8  2  3,647    42 

Pay  of  Levies,  militia 42,871  4  3  18,220    5  3 

Rec'd  on  Loan  from  U.  S.  Apr.  18, 1786  523,848  5  i  144,058    5  4 

For  V5  of  interest  due  in  this  loan..  105,669  9  8 

Claims  on  forfeited  estates  25,897  8  10  3,884  12  3 

Bills  of  Credit  issued  June  30,  1780. .  3,612  16  o  i,i74    3  i 

Miscellaneous    1,047 

Total  Pounds 785,300  14    7  206,297  15  o 

Demands  against  forfeited  estates  for 

which  no  certificates  have  been  issued       41,01712    5 
Interest  on  above  206,297  15    o 

Total  Pounds 1,032,616    2    o 

The  State  held  the  following  Continental  securities  in  the  Treasury : 

£       s  d 

Certificates  issued  to  Wm.  Barber 458,213    4  o 

"  "         Loan  Officers  360,683    9  3 

"               "         Pierce,  Burrel,  Deming     389,498    9  9 
Interest  facilities  2,502  14  8 

Total  Pounds  1,210,897  16  8 

''Of  the  above-mentioned  Loan  Office  and  Barber's 
certificates,  the  sum  of  £470,649,  173s.,  69d.  was  re- 
ceived in  one  loan  by  the  state  in  1786  and  one-fifth  of  the 
interest  that  was  due  thereon,  to  the  31st  of  December, 
1784,  then  paid  and  certificates  for  the  remaining  four- 
fifths  issued  payable  in  one  year  of  which  three-quarters 
remained  unredeemed."  The  sum  was  computed  by 
Hamilton  to  amount  to  £565,586,  which  was  to  be  sub- 
tracted  from  the   above-cited  debt  in  order  to  find  the 


256       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [580 

net  debt  of  the  state,  or  £1,032,616  less  £565,586  equals 
£467,030,  which  at  eight  shillings  to  the  pound  equals 
$1,167,575.  The  assumption  of  the  state  debt  by  the  United 
States  changed  this  sum  from  a  debt  to  a  source  of  revenue. 
According  to  the  Act  of  Congress  each  subscriber  to  the 
debt  received  three  certificates :  one  for  a  sum  equal  to  four- 
ninths  of  the  subscribed  sum  to  bear  interest  at  six  per  cent ; 
another  for  two-ninths  of  the  subscribed  sum  to  bear  inter- 
est at  six  per  cent  after  1800;  and  the  third  certificate  for 
the  remaining  three-ninths,  bearing  an  interest  of  three  per 
cent.  New  York's  quota  of  the  $21,500,000  was  $1,200,000 
and  the  amount  actually  subscribed  by  the  state  was  $1,183,- 
717,  so  that  the  provision  made  by  Congress  was  ample  for 
assuming  all  the  indebtedness  incurred  by  the  state.  By 
act  of  February  2^,  1791,  the  treasurer  was  directed  to  sub- 
scribe to  the  U.  S.  loan  all  the  continental  paper  in  the  treas- 
ury and  receive  in  exchange  U.  S.  funded  stock.  As  a  re- 
sult of  these  two  operations  we  find  that  the  state  possessed 
the  following  U.  S.  stocks  on  December  31,  1791 : 

Due  1792 

United  States  6%  Stock $898,847.03  633,132 

"       3%      "       680,68170  721,936 

"       deferred  stock 520,688.66  766,793 

$2,100,197.39 

In  order  to  simplify  the  outstanding  obligations  of  the 
state,  creditors  of  the  state  were  offered  the  opportunity  of 
exchanging  their  certificates  for  the  six  per  cent  and  three 
per  cent  United  States  funded  stock  which  the. state  had 
acquired.  In  order  to  carry  out  this  plan  the  state  ex- 
changed some  of  its  six  per  cent  stock  for  deferred  stock, 
and  in  1792  the  funds  in  the  treasury  were  as  stated  above. 
It  might  at  first  thought  seem  that  the  state  was  a  loser  by 
this  method,  but  what  the  state  would  have  received  in  in- 


^8l]  STATE  FUNDS  257 

terest  on  the  larger  amount  of  six  per  cent  stock  would  have 
been  paid  out  in  interest  on  its  own  certificates  and  there 
was  a  positive  advantage  in  the  disappearance  of  the  old 
confused  obligations. 

In  the  assumption  of  the  state  debts  it  was  also  necessary 
to  adjust  the  accounts  which  had  accumulated  during  the 
revolutionary  period  between  the  various  states  and  Con- 
gress. The  states  which  had  balances  to  their  credit  were 
entitled  to  have  these  funded  upon  the  same  terms  with  the 
other  part  of  the  domestic  debt.  The  commissioners  ap- 
pointed to  settle  these  balances  found  balances  against  six 
states  amounting  to  $3,517,584,  among  which  New  York 
was  by  far  the  largest  debtor. 

An  act  of  Congress,  February,  1799,  allowed  these  debtor 
states  to  discharge  these  claims  either  by  passing  a  law 
before  April,  1800,  agreeing  to  pay  within  five  years  an 
amount  equivalent  to  the  debt  of  each  state  assumed  by  the 
United  States,  or  by  expending  this  amount  in  erecting  for- 
tifications. This  act  released  New  York  from  a  considerable 
part  of  her  balance  due  the  United  States,  since  by  agree- 
ing to  pay  $1,183,717  within  five  years  she  could  discharge 
her  debt  of  $2,074,846,  thereby  saving  herself  $891,129. 
Accordingly  an  act  was  passed  in  which  the  state  agreed  to 
spend  on  fortifications  an  amount  equal  to  that  assumed  by 
the  United  States,  viz.,  $1,183,717,  and  $20,000  was  appro- 
priated for  this  purpose.  New  York  and  Delaware  were 
the  only  two  states  that  could  derive  any  benefit  from  this 
act,  and  the  other  states  evinced  no  disposition  to  pay  any 
part  of  these  balances.  The  committee  on  state  balances, 
reporting  in  1801,  stated  that  New  York  had  been  credited 
with  having  spent  $222,810  on  fortifications,  but  "  since 
none  of  the  other  states  have  manifested  any  disposition  to 
pay  the  balances  reported  against  them,  and  since  Congress 
has  already  released  New  York  from  such  a  large  amount," 


258       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [582 

it  was  their  opinion  "  that  a  release  of  the  balances  due 
from  other  states  is  [was]  expedient  and  for  this  purpose 
a  bill  is  [was]  submitted."  ^ 

The  following  debts  were  due  from  debtor  states  from 
January  ist,  1790,  to  January  ist,  1797,  at  four  per  cent 
interest :  * 

Principal  Interest  Total 

New  York $2,074,846  $580,956  $2,655,802 

Pennsylvania 76,709  21,478  98,187 

Delaware 612,428  171,480  783,908 

Maryland 151,640  4^,459  194,099 

Virginia 100,879  28,246  129,125 

North  Carolina 501,082  140,303  641,385 

$3,517,584  $984,923  $4,502,506 

No  action  seems  to  have  been  taken  by  Congress,  and  the 
following  year  another  report  was  made  in  which  it  was 
stated  that  Pennsylvania  had  passed  a  law  by  which  she 
agreed  to  pay  her  balance  as  soon  as  the  other  states  paid 
theirs.  However,  since  in  the  opinion  of  the  commissioners 
no  measures  of  coercion  could  be  resorted  to  and  since 
a  further  continuance  of  the  demands,  the  justice  and 
equity  of  which  the  states  did  not  admit,  would  occasion 
irritation  and  disquietude,  they  recommended  that  the 
claims  against  the  states  be  extinguished  and  reported  a  bill 
accordingly.  In  1802,  New  York  passed  an  act  prohibiting 
further  appropriations;  so  that  it  seems  that  only  $222,810 
of  the  $2,074,846  was  ever  paid  in  discharge  of  the  debt  to 
the  United  States. 

In  1797,  the  state  sold  the  six  per  cent  deferred  stock  to 
the  Bank  of  New  York  for  $1,366,150,  which  sum  was  to 
be  paid  in  1809.     Meanwhile  the  treasurer  and  the  comp- 

1  Am.  State  Papers,  vol.  i,  p.  697. 

2  Ibid.,  Finance,  vol.  i,  p.  479. 


583]  STATE  FUNDS  259 

troller  were  declared  members  of  the  board  of  directors  of 
the  bank,  and  a  bank  statement  was  to  be  furnished  to  the 
governor  whenever  required.  The  three  per  cent  stock  was 
sold  in  18 1 8  and  in  1825  the  Bank  of  New  York  made  its 
final  payment  on  the  purchase  of  the  six  per  cent  deferred 
stock,  and  all  these  sums  were  used  either  in  paying  off  the 
state  debt  or  frittered  away  in  paying  the  annual  current 
expenses. 

State  Loans  and  Investments. — The  proceeds  from  the 
sale  of  public  lands  constituted  a  large  part  of  the  General 
Fund.  This  money  was  either  spent  in  defraying  current 
expenses  or  was  invested  in  an  unsatisfactory  manner  with 
little  regard  for  its  security.  Chief  among  the  methods  of 
investing  these  funds  may  be  mentioned  the  loans  to  coun- 
ties, loans  to  individuals  and  corporations,  loans  on  mort- 
gages on  land  and  investments  in  bank  stock. 

The  first  county  loan  was  made  in  1786,  when  $500,000 
were  issued  in  bills  of  credit,  and  a  portion  of  this  was 
loaned;  the  sum  was  apportioned  by  legislative  act.  The 
purpose  of  this  first  loan  was  to  furnish  a  circulating 
medium,  the  purpose  of  the  second  loan,  made  in  1792,  when 
$200,000  was  apportioned  to  the  several  counties,  was  to 
enable  the  counties  to  enjoy  the  benefits  of  the  prosperity  of 
the  state.  The  last  county  loan  was  made  in  1808,  when  the 
state  borrowed  $400,000  from  the  Bank  of  New  York  at  six 
per  cent,  in  anticipation  of  the  payment  of  the  debt  due  by 
the  bank  to  the  state,  and  loaned  it  to  the  counties.  This 
loan  was  intended  primarily  to  benefit  the  northern  and 
western  counties,  which  were  not  so  prosperous  as  those  in 
the  southern  district.  The  southern  district  was  excepted 
from  the  general  provisions  of  the  loan,  although  provision 
was  made  whereby  it  might  secure  a  portion  of  it  if  it  so 
desired. 


26o       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [584 

1786  1792 

Newport £32,000                        ii9,300 

Albany  22,000                           16,400 

Kings   4,500                             1,900 

Queens  11,500                           8,600 

Suffolk  10,000                           9,600 

iRichmond  4,5oo                           1,900 

Westchester   9,500                          14,100 

Dutchess   17,000                         27,200 

Orange    10,000                          10,900 

Ulster 14,000                          16,200 

Montgomery 12,000                            9,400 

Washington    3,000                           13,400 

Columbia  16,300 

Renssalaer 13,400 

Clinton  1,400 

Saratoga   10,400 

Otsego  3,000 

Herkimer    2,800 

Tioga 2,600 

Britain  1,200 

Total £150,000  £200,000 

In  1791,  the  state  invested  in  152  shares  in  the  Bank  of 
the  United  States,  and  from  this  time  on  the  state  became  a 
frequent  subscriber  to  the  stock  of  new  banks.  The  act  of 
incorporation,  which  was  always  a  special  act  of  the  legis- 
lature down  to  1838,  usually  contained  a  provision  whereby 
a  certain  number  of  shares  were  reserved  for  the  state.  As 
a  whole  the  investments  in  bank  stock  proved  fairly  success- 
ful, and  for  a  number  of  years  the  dividends  from  banks 
furnished  a  considerable  part  of  the  annual  revenues.  The 
investments  in  the  stock  of  corporations,  especially  canals, 
did  not  turn  out  so  successfully.  The  loans  to  individuals 
and  to  corporations  proved  to  be  the  least  successful  of  all. 

The  relative  importance  of  these  various  policies  may 
best  be  seen  from  the  table  below  which  shows  the  amount 
invested  in  each  way  in  18 10  and  in  1830. 


585]  STATE  FUNDS  26 1 

2820  2830 

Bank  Stock $268,800              $127,740 

Loans  to  Counties i  ,027,032                386,896 

Loans  to  Individuals 26,391 

Mortgages  on  Land 690,627                806,313 

Bonds  sold  S'V'R  G'l 135,205                  23,320 

950  Shares  Western  Inl.  Lock  Nav.  Co.  ...  92,000 

3  %  Stock  of  U.  S 779,656 

Debt  due  from  Bank  of  N.  Y 1,262,091 

Total $4,281,802  $1,344,269 

The  general  plan  of  managing  the  county  loans  was  as 
follows.  Two  loan  officers  in  each  county  were  elected  from 
among  the  freeholders  by  the  supervisors  and  judges  of  one 
of  the  county  courts.  These  loan  officers  loaned  sums  in 
small  amounts  to  individuals  on  mortgage  securities  on  land, 
lots  or  houses  which  the  law  required  to  be  worth  twice  the 
sum  loaned.  The  lands  were  to  be  sold  by  the  loan  officers 
on  default  of  payment  of  either  interest  or  principal,  and  the 
loan  officers  were  paid  out  of  the  interest  of  loans.  The 
loan  of  1786  was  apportioned  to  20  counties  and  was  to 
run  until  1802  and  to  bear  six  per  cent  interest;  the  mini- 
mum sum  loaned  was  to  be  $75  and  the  maximum 
$350.  In  1808,  the  state  borrowed  $400,000  at  six  per 
cent  from  the  Bank  of  New  York,  and  loaned  this  amount 
to  the  counties  at  seven  per  cent  in  sums  of  from  $50  to 
$500,  and  the  loan  was  to  run  until  181 5. 

The  results  of  these  experiments  in  finance  were  anything 
but  satisfactory.  The  loan  of  1786  was  originally  for  four- 
teen years,  which  would  make  it  payable  in  1800,  but  was 
extended  to  1829,  at  which  time  there  were  still  due  $20,- 
665.  Much  confusion  arose  over  the  manner  of  keeping 
accounts  as  it  was  practiced  by  the  loan  officers,  and  charges 
were  made  that  payments  for  principal  were  charged  to  in- 
terest; losses  were  sustained  upon  bona-fide  loans  due  to 
insufficiency  of  the  value  or  failure  of  the  titles  to  the  mort- 


262        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [586 

gaged  lands;  large  sums  of  bonds  and  mortgages  for  lands 
sold  were  merely  nominal ;  in  a  large  number  of  cases  mort- 
gages were  foreclosed  and  the  premises  bid  in  for  the  state 
by  the  attorney-general  at  a  very  small  sum  and  the  residue 
was  continued  as  a  part  of  the  fund  on  the  strength  of  the 
personal  liability  of  the  mortgagor,  a  source  from  which 
there  was  every  reason  to  believe  the  state  would  realize 
nothing. 

Under  laws  of  1803  and  1805  the  comptroller  was  author- 
ized to  make  loans  to  individuals  in  amounts  varying  from 
$100  to  $4,000  for  two-year  periods,  taking  as  surety 
a  bond  and  mortgage  on  land  or  houses  worth  twice  the 
amount  of  the  loan.  In  18 10,  an  assembly  committee,  ap- 
pointed to  investigate  the  management  of  the  state  funds, 
found  that  of  $38,500  loaned  out  in  1803  only  four  persons 
had  repaid  their  loans  and  that  there  was  still  due  the  state 
$34,000  of  principal  to  $4,000  of  interest,  and  of  $76,100 
loaned  in  1805  only  $1,300  had  been  repaid.  "This  dis- 
closed the  alarming  fact,"  said  the  committee,  "  that  there 
is  at  this  time  $106,000  of  principal  of  the  state  funds  in 
the  hands  of  private  individuals  on  which  many  thousands 
of  interest  are  due."  ^ 

While  the  investment  in  banks  proved  the  safer  plan,  yet 
this  was  not  wholly  successful.  In  1830  the  state  lost  $35,- 
000  through  the  insolvency  of  the  Banks  of  Hudson  and 
Colimibia.  The  dividends  from  banks  amounted  to  a  con- 
siderable sum  for  a  number  of  years,  the  high-water  mark 
was  reached  in  18 16,  when  they  amounted  to  over  $90,000. 

While  these  methods  of  investing  public  funds  would  not 
be  countenanced  to-day,  in  passing  judgment  upon  them  it 
must  be  remembered  that  at  the  time  they  were  in  vogue 
perhaps  no  safer  method  of  investing  the  public  money  was 

1  Assembly  Journal  1810,  p.  164. 


c^Sy]  STATE  FUNDS  263 

possible.  It  was  no  doubt  thought  that  the  advantages  se- 
cured through  extending  aid  to  citizens  of  the  state  in  need 
of  capital  would  more  than  offset  the  disadvantages  which 
would  result  through  a  loss  in  the  principal  and  interest, 
which  would  inevitably  result.  Furthermore,  strict  ac- 
countability of  public  officers  was  not  required  as  now.  It 
is  impossible  to  state  what  percentage  of  net  profits  was 
realized  upon  these  loans  and  investments,  or  what  per- 
centage of  the  capital  was  actually  lost,  because  the  capital 
and  interest,  when  paid  in,  became  a  part  of  the  cash  in  the 
treasury  and  was  either  reinvested  or  used  in  defraying  the 
current  expenses  of  government. 

A  part  of  the  diminution  of  the  General  Fund  was  due 
to  the  establishment  of  the  Common  School  Fund,  and  dona- 
tions made  to  the  Literature  Fund  and  the  Canal  Fund.  The 
General  Fund  ceased  to  exist  in  1835,  and  since  that  time 
the  term  has  been  used  to  designate  the  receipts  which  are 
applicable  to  the  payment  of  current  expenses  as  distin- 
guished from  the  trust  and  special  funds. 

Educational  Funds 

Common  School  Fund,  1806  to  IQ12. — The  governor's 
annual  message  of  1804  recommended  that  schools  b& 
established  in  every  village,  and  that  the  indigent  be 
educated  at  public  expense.  Following  out  this  sugges- 
tion the  legislature  passed  a  law  in  1805  establish- 
ing a  permanent  fund  for  the  encouragement  of  schools. 
Five  hundred  thousand  acres  of  the  public  domain  were 
set  apart  for  this  purpose,  and  it  was  provided  that 
whenever  the  revenue  from  this  fund  should  amount  to 
$50,000  annually  it  should  be  divided  among  the  coun- 
ties, and  that  the  counties  could  raise  by  tax  a  sum  equal 
to  that  received  from  this  fund.  The  sum  collected  locally 
was  to  be  used  for  buying  lots,  erecting  school  houses  and 


264       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [588 

for  repairs,  while  the  state  funds  were  to  be  used  in  paying 
the  salaries  of  teachers.  From  time  to  time  the  fund  was 
increased;  in  1807,  1,000  shares  of  stock  of  the  Merchants 
Bank  were  transferred  to  this  fund;  in  181 3,  the  fees  and 
perquisites  of  the  clerks  of  the  supreme  court,  after  de- 
ducting their  salaries,  were  added  to  it;  in  1819,  one-half 
of  the  quit  rents  and  commutation  of  quit  rents  were  added ; 
in  1822,  all  the  unappropriated  land  of  the  state,  which 
amounted  to  991,659  acres,  was  added,  and  in  1827,  there 
was  added  $100,000  of  bank  stock.  The  county  loans  of 
1786,  1792,  1808,  and  1840  were  later  transferred  to  this 
fund. 

The  constitution  of  1846  provided  that  $25,000  should 
annually  be  transferred  from  the  revenue  of  the  United 
States  Deposit  Fund  to  the  capital  of  the  Common  School 
Fund.  This  provision  was  retained  in  the  subsequent  re- 
visions of  the  constitution,  and  accordingly  the  capital  has 
been  increased  annually  by  this  amount  from  1846  to  19 12. 
Further  additions  were  made  by  the  sale  of  the  public  lands. 
In  1869  the  balance  of  the  revenue  remaining  after  paying 
the  amounts  appropriated  from  the  fund  was  appropriated 
to  increase  the  capital  of  the  fund.^  Practically  the  only 
additions  to  the  capital  of  this  fund  during  the  last  forty 
years  was  the  annual  payment  of  $25,000  provided  for  in 
the  constitution  with  the  exception  of  $500,000  which  was 
contributed  by  the  General  Fund  in  1882  (chap.  108).  The 
fund  amounted  to  one  million  dollars  by  1820;  by  1840,  it 
had  grown  to  two  millions.  Thirty  years  more  were  re- 
quired to  reach  the  three-million  mark.  By  1890,  it 
amounted  to  over  four  millions,  and  in  19 12,  it  amounted 
to  $4,848,141. 

The  capital  was  principally  invested  in  mortgages  on  real 
estate,  the  borrower  giving  both  a  personal  bond  and  a 

1  Laws  1869,  chap.  645. 


589]  STATE  FUNDS  265 

mortgage  on  his  property.  Other  investments  consisted  of 
bonds  accepted  by  the  state  for  balances  owing  by  individ- 
uals on  the  purchase  price  of  the  unappropriated  lands,  loans 
to  individuals  and  some  of  the  money  was  invested  in  bank 
stock  and  state  stocks.  There  is  no  means  of  knowing  how 
much  money  was  lost  to  the  fund  through  lack  of  security 
or  through  personal  delinquencies,  but  there  is  every  reason 
to  suppose  that  a  considerable  amount  was  lost  in  this  way. 
An  auditing  of  that  part  of  the  fund  invested  in  bonds 
for  lands  in  19 10  showed  that  in  many  instances  during  the 
past  thirty  years  no  payments  of  either  principal  or  interest 
had  been  made  to  the  state.  This  wasteful  and  inefficient 
method  of  investment  was  supplanted,  as  far  as  possible, 
by  the  business-like  method  of  investing  this  money  in  town, 
city,  county  and  village  bonds.  This  method  insured  the 
safety  of  the  principal  and  the  certainty  of  the  income.  In 
1 91 2,  the  capital  amounted  to  $4,848,141,  and  of  which 
$4,543,300  was  invested  in  town  and  city  bonds  yielding 
three  and  one-half  and  four  percent.  There  was  still  $49,- 
641  invested  in  bonds  for  lands,  and  $15,670  in  bonds  for 
loans.  ^ 

The  annual  income  from  this  fund  did  not  amount  to 
$50,000  until  181 4,  when  the  first  payment  was  made.  As 
the  income  increased,  larger  and  larger  amounts  were  appro- 
priated by  the  legislature;  thus  in  1820  the  annual  appro- 
priation from  this  fund  was  $80,000,  and  in  1827,  it  was  in- 
creased to  $100,000.  Whenever  the  annual  income  was  not 
sufficient  to  pay  the  annual  appropriation  as  fixed  by  the 
legislature,  the  deficiency  was  made  up  from  the  General 
Fund.  Thus  from  18 19  to  1829  there  were  annual  de- 
ficits, with  the  exception  of  the  year  1825,  and  the  total  of 
these  deficits  amounted  to  $81,853.    Beginning  in  1839,  the 

^  A.  R.  Comptroller  19 13,  p.  128. 


266       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [590 

income  was  annually  increased  by  transferring  a  part  of  the 
income  of  the  U.  S.  Deposit  Fund  to  it.  The  actual  amount 
transferred  varied  from  $16,500  in  the  early  years  to  $25,- 
KX)0  in  recent  years.  During  the  eighties  especially  the  ap- 
propriations exceeded  the  annual  income  and  the  deficits 
arising  were  provided  for  by  appropriations  from  the  gen- 
eral fund.  In  1882,  1885,  and  1889,  these  amounts  appro- 
priated from  the  General  Fund  were  $355,734,  $46,947  and 
$60,145  respectively. 

It  appears  clear  then  that  in  the  last  analysis  the  payments 
to  common  schools  have  always  been  a  charge  upon  the  Gen- 
eral Fund,  and  the  maintenance  of  a  separate  fund  has  been 
merely  a  bookkeeping  device  with  no  real  foundation  in  fact. 
For  in  the  first  place  the  Common  School  Fund  was  created 
out  of  the  General  Fund,  and  in  the  second  place,  wherever 
deficits  arose  these  were  provided  for  out  of  the  General 
Fund.  The  only  thing  gained  by  having  a  separate  fund  was 
that  it  preserved  this  much  of  the  General  Fund  from  being 
dissipated  and  squandered  at  the  time  when  the  legislature 
was  using  the  capital  funds  of  the  state  to  pay  current  ex- 
penses. Since  1904,  the  support  of  the  common  schools  has 
been  made  a  direct  charge  upon  the  General  Fund,  and  the 
revenue  from  the  Common  School  Fund  has  been  trans- 
ferred to  the  General  Fund.  There  would  seem  to  be  no 
good  reason  for  maintaining  a  separate  fund  longer. 

It  is  interesting  to  recall  that  the  Common  School  Fund 
was  established  to  educate  the  indigent  children  of  the  state. 
A  new  section  was  inserted  in  the  constitution  of  1894,^ 
which  makes  it  the  duty  of  the  legislature  to  provide  for  the 
maintenance  and  support  of  a  system  of  free  common 
schools,  wherein  all  the  children  of  the  state  may  be  edu- 
cated. Education  to-day  is  no  longer  a  form  of  charity  but 
a  necessity. 

1  Art.  ix,  sec.  i. 


591  ]  STATE  FUNDS  267 

Literature  Fund,  iypo-ipi2. — As  early  as  1786,  there 
was  reserved  in  each  township  one  lot  "  for  gospels  and 
schools  "  and  one  for  the  "  promotion  of  literature  " ;  in 
1790,  the  lands  of  Lake  George  region  and  Governor's 
Island  were  vested  in  the  regents  of  the  University  for  edu- 
cational purposes;  annual  appropriations  and  lottery  grants 
were  made  to  the  fund;  in  1819  one-half  the  quit  rents  col- 
lected, and  in  1827^  canal  stock  worth  $150,000  were  added, 
so  that  by  1830,  the  fund  amounted  to  $256,344.  It  was 
invested  in  stocks  of  the  state  and  bank  stock.  In  19 12,  the 
fund  amounted  to  $284,201,  which  was  invested  in  city, 
town  and  village  bonds  and  100  shares  of  Albany  Insurance 
Company  stock. 

The  annual  revenue  was  increased  yearly  by  contributions 
from  the  income  of  the  United  States  Deposit  Fund,  the 
amounts  contributed  varying  from  $25,000  to  $34,000  an- 
nually. From  1888  to  1905,  sums  varying  in  amount  from 
$60,000  to  $295,000  were  annually  transferred  to  the  in- 
come of  this  fund  from  the  General  Fund.  Since  1906, 
the  net  income  of  this  fund  has  been  transferred  to  the 
General  Fund  to  be  used  for  educational  purposes.  The 
payments  from  the  fund  were  made  as  dividends  to 
academies,  and  expended  for  educating  teachers,  for  pur- 
chasing books  and  for  defraying  the  current  expenses  of  the 
regents  of  the  university.  The  amounts  apportioned  to 
academies  were  based  upon  the  number  of  pupils  from  the 
several  academies  who  passed  the  regents'  examination. 

There  would  seem  to  be  no  good  reason  for  maintaining 
this  fund  as  a  separate  fund  longer.  It  together  with  the 
common  school  fund  might  be  consolidated  into  one  fund 
since  the  net  revenue  of  each  is  now  paid  into  the  general 
fund. 

Lewiston  School  Fund,  1810-1826. — For  a  number  of 
years,  beginning  with  18 10,  a  small  amount  of  money  was 


268       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [592 

handled  by  the  comptroller  in  the  interest  of  the  Lewiston 
schools;  but  in  1826  this  was  transferred  into  the  hands  of 
commissioners,  who  took  charge  of  the  fund,  and  used  it 
for  the  benefit  of  the  Lewiston  schools. 

The  United  States  Deposit  Fund. — The  United  States 
Deposit  Fund  was  created  out  of  the  surplus  revenues 
which  the  United  States  distributed  to  the  several  states  in 
1837.  The  total  amount  distributed  was  $28,101,644,  of 
which  amount  New  York  received  $4,014,520,  which  was 
paid  in  three  equal  installments  on  January  20th,  April  ist 
and  July  ist.  New  York  State  regarded  this  sum  strictly 
as  a  trust  fund,  which  the  state  held  merely  as  a  trustee,  and 
which  it  might  be  required  to  pay  back  at  any  time ;  accord- 
ingly the  fund  was  to  be  maintained  intact  and  only  the  in- 
terest could  be  used  by  the  state.  In  anticipation  of  a 
fourth  installment,  money  was  borrowed  from  the  canal 
fund  and  turned  over  to  the  commissioners  of  this  fund,  but 
upon  the  failure  of  the  United  States  to  pay  a  fourth  in- 
stallment these  advances  were  finally  paid  back  to  the  canal 
fund  and  the  fund  consisted  of  the  sum  originally  given  by 
the  United  States. 

The  method  of  investing  the  moneys  of  this  fund  pre- 
sented a  serious  problem.  It  was  felt  that  the  sum  should 
be  generally  diffused  throughout  the  state,  in  order  that  all 
citizens  might  share  equally  in  the  benefits  to  be  derived 
therefrom.  The  comptroller,  in  his  report  on  the  subject 
in  1836,  favored  the  apportionment  of  the  sum  among  the 
counties  according  to  population  and  then  loaning  it  to  citi- 
zens of  these  counties,  who  should  give  mortgages  on  their 
lands  as  security.  This  plan  was  adopted  by  act  of  April 
4th,  1837,  which  provided  that  the  lands  on  which  mort- 
gages were  taken  should  be  worth  double  the  amount  of  the 
sum  loaned,  exclusive  of  buildings ;  that  the  lands  should  be 
improved  and  the  borrower  should  have  a  title  in  fee  to  the 


^93]  STATE  FUNDS  269 

land.  The  interest  was  fixed  at  seven  per  cent.  Outside  of 
New  York  City  the  sums  loaned  were  not  to  exceed  $2,000, 
nor  to  be  less  than  $200 ;  within  the  city  the  limits  were  re- 
spectively $5,000  and  $500.  Two  commissioners  in  each 
county,  to  be  appointed  by  the  governor  and  confirmed  by 
the  Senate,  were  to  manage  the  fund;  they  had  absolute 
power  over  mortgages  and  collections  in  their  respective 
counties  and  could  foreclose  on  default  of  payment  of  in- 
terest and  could  discharge  mortgages  when  paid ;  they  were 
allowed  to  deduct  their  own  compensations,  pay  all  costs, 
disbursements  and  expenses,  and  the  net  receipts  were  paid 
once  a  year  into  the  treasury.  The  compensation  was  as 
follows:  for  loaning  $25,000  or  less,  three-fourths  of  one 
per  cent;  for  sums  over  $25,000  and  less  than  $50,000,  the 
rate  was  one-half  of  one  per  cent;  for  loans  above  $50,000 
made  outside  of  New  York  City,  the  rate  was  one-half  of 
one  per  cent,  and  loans  made  within  the  city,  three-fourths 
of  one  per  cent.  These  commissions  were  divided  among 
the  commissioners  and  were  inadequate  compensation.  The 
losses  of  the  principal  were  made  a  charge  upon  the  income, 
and  this  provision  was  the  only  thing  that  saved  the  fund 
from  extinction.  Another  provision  which  gave  the  comp- 
troller power  to  invest  any  money  of  this  fund  which  hap- 
pened to  be  in  the  treasury  in  securities  also  helped  greatly 
to  keep  the  fund  intact.  This  enabled  the  comptroller  grad- 
ually to  secure  control  over  larger  and  larger  amounts  of 
this  fund,  and  this  provision  was  the  one  redeeming  feature 
of  the  law.  Up  to  1880,  however,  over  three-fourths  of  the 
fund  remained  in  the  hands  of  the  commissioners.  Of  the 
amount  invested  by  the  comptroller  in  securities  not  a  single 
dollar  was  lost  and  the  net  revenue  was  greater  than  that 
received  from  the  interest  on  mortgages. 

The  system  worked  badly  from  the  very  beginning,  yet  it 
probably  worked  better  under  the  conditions  existing  in 


270       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [594 

1837  than  it  has  worked  in  more  recent  times.  The  plan  of 
loaning  other  funds  had  already  been  tried  with  unsatis- 
factory results  in  the  county  loans  of  1786,  1792  and  1808, 
and  while  not  unmindful  of  these  losses  the  comptroller 
seemed  to  think  they  were  inevitable ;  for  he  said,  "  these 
losses  have  been  less  probably  than  on  the  same  amount  of 
capital  invested  for  the  same  length  of  time  in  any  other 
mode."  It  must  be  remembered  that  this  was  the  era  of 
'*  wild-cat  banking,"  and  the  state  which  was  already  an 
investor  in  shares  of  bank  stock  had  lost  some  of  its  funds 
through  bank  failures.  Besides  this,  the  wave  of  popular 
indignation  and  distrust  of  banks  and  corporations  was  at 
its  height  at  this  period  and  any  suggestion  to  invest  this 
sum  in  stocks  or  shares  would  doubtless  have  aroused  in- 
tense opposition. 

On  the  other  hand,  in  1837  the  farmers  were  experienc- 
ing difficulty  in  securing  loans  and  this  idea  was  conceived 
to  furnish  relief  to  the  farmers.  The  interest  rate  was 
favorable  to  land  owners  having  good  security  and  they 
were  still  in  need  of  capital.  Good  land  security  furnished 
a  satisfactory  basis  for  permanent  investment  but  would 
not  enable  them  to  get  bank  accommodations. 

It  seems  probable,  then,  that  the  practice  of  loaning 
money  on  mortgages  on  land  did  work  fairly  well  under 
the  existing  conditions  at  the  time,  when  losses  were  com- 
mon in  every  branch  of  industry  and  a  rigid  accountability 
over  the  expenditures  of  state  funds  was  not  enforced  as 
now.  The  mistake  that  was  made  and  that  was  perpetuated 
down  to  a  recent  date  was  in  maintaining  the  system  long 
after  it  had  ceased  to  work  satisfactorily  and  long  after  con- 
ditions which  seemed  to  justify  its  existence  had  ceased  to 
exist.  When  the  interest  rate  ceased  to  be  an  inducement 
to  borrowers  having  good  security,  the  deposit-fund  mort- 
gages were  relegated  to  the  lands  of  poorer  quality  and  to 


^p^j  STATE  FUNDS  271 

persons  of  indifferent  credit;  when  loans  could  no  longer 
be  made  at  the  rate  fixed  by  law,  the  large  sums  of  money 
lying  idle  in  the  hands  of  the  commissioners  furnished  the 
stimulus  to  loan  sums  on  poorer  and  poorer  security  and 
increased  the  temptations  to  laxity  of  administration  and 
improper  use  of  funds.  Even  the  lowering  of  the  rate  of 
interest,  which  was  reduced  to  five  per  cent,  did  not  remove 
the  difficulties  which  were  inherent  in  the  system  itself. 
Even  if  every  commissioner  had  been  competent  and  effi- 
cient, the  system  would  not  have  worked  successfully,  as 
will  be  seen  from  a  review  of  the  history  of  the  management 
of  the  fund.  This  inherent  weakness,  coupled  with  the  lax 
administration  of  the  fund  on  the  part  of  the  County  Loan 
Commissioners,  made  the  plan  the  most  "  expensive,  ineffi- 
cient and  inadequate  imaginable." 

The  history  of  the  management  of  the  fund  is  a  sad  one 
and  all  the  more  reprehensible,  when  one  considers  the 
amount  of  financial  ability  to  be  found  among  the  citizens 
of  this  state.  There  was  scarcely  a  single  provision  of  the 
law  that  was  not  violated.  Money  was  loaned  upon  prop- 
erty not  worth  double  the  amount  of  the  mortgage,  aside 
from  improvements,  due  to  the  incompetency  of  commis- 
sioners to  make  appraisals  or  to  their  inactivity;  second 
and  third  mortgages  were  taken  in  spite  of  the  provision 
of  the  law  forbidding  loans  being  made  upon  incumbered 
property ;  jforged  and  fictitious  mortgages  were  taken ;  com- 
missioners defaulted  and  absconded;  sums  were  loaned  in 
excess  of  the  maximum  amount  fixed  by  law,  as  was  shown 
by  a  recent  investigation  in  1908,  which  discovered  over 
twenty  such  cases ;  boards  of  supervisors  failed  to  examine 
the  accounts  of  commissioners  or  overlooked  irregularities. 
The  result  was  an  annual  loss  to  the  state,  resulting  from 
failure  of  titles,  foreclosures  of  mortgages  and  bidding 
in  lands  by  the  state  at  the  full  face  value  of  the  mortgage 


2^2        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [596 

when  they  were  worth  much  less  and  through  costs  to  the 
state  of  attorneys'  fees  in  connection  with  foreclosures. 

To  prevent  these  losses  comptrollers  repeatedly  urged 
that  the  moneys  be  called  in  and  invested  in  public  works, 
or  it  was  suggested  that  the  commissioners  be  elected  by  a 
vote  of  the  people  instead  of  being  appointed  by  the  gov- 
ernor, and  that  the  loss  of  principal  and  interest  be  made  a 
charge  upon  the  county  where  the  sum  was  loaned;  by 
making  the  loss  a  charge  upon  the  county  it  was  thought 
that  as  taxpayers  the  citizens  would  take  a  direct  interest 
in  the  proper  administration  of  the  fund.  After  a  thor- 
ough investigation  made  in  1877,  Comptroller  Olcott 
recommended  that  the  office  of  commissioner  be  abolished 
and  the  fund  be  placed  in  the  hands  of  the  comptroller. 
Year  after  year  this  recommendation  was  repeated,  until 
one  comptroller  exclaimed  that,  "  A  report  from  his  de- 
partment without  some  suggestion  looking  to  greater  safety 
for  this  fund  would  hardly  be  recognized,"  and  he  added, 
"  a  yet  greater  surprise  would  be  to  see  the  suggestion  acted 
upon."  ^ 

Finally,  however,  in  1897  the  law  was  changed  by  an 
affirmative  vote  of  126  assemblymen  and  35  senators,  so 
as  to  take  the  power  of  making  investments  out  of  the 
hands  of  the  commissioners  and  to  place  this  power  in  the 
hands  of  the  comptroller,  who  promptly  invested  it  largely 
in  securities.  The  next  year  the  law  was  again  changed, 
placing  the  entire  fund  again  in  the  hands  of  the  commis- 
sioners. This  law  was  even  worse  than  the  act  prior  to 
1897,  since  now  the  fund  was  placed  entirely  in  the  com- 
missioners' hands,  and  they  were  given  authority  to  com- 
pel the  comptroller  to  turn  over  all  the  money  belonging 
to  the  fund  to  them.     As  a  matter  of  fact,  they  did  not  do 

1  A.  R.  Comptroller  1878,  p.  27. 


c^gyj  STATE  FUNDS  273 

this,  and  nearly  two-thirds  of  the  fund  remained  invested 
in  securities.  Finally,  in  19 10,  the  authority  of  the  com- 
missioners to  loan  money  of  the  fund  was  abrogated  and 
they  were  required  to  remit  all  moneys  to  the  state  treas- 
ury and  the  comptroller  was  authorized  to  invest  the  funds 
in  securities.  On  September  30,  19 12,  the  fund  was  held 
as  follows:  invested  in  mortgages  by  loan  commissioners, 
$1,028,145;  invested  in  securities  by  comptroller,  $2,384,- 
560;  judgments,  court  of  claims,  $81,498. 

From  April  4,  1837,  down  to  September,  1906,  the  state 
lost  on  resales  of  lands  foreclosed,  $168,819;  on  fore- 
closures at  the  time  of  foreclosures,  $56,047;  by  failure  of 
title,  $33,976,  and  by  defalcation,  $44,804.  The  total  trans- 
actions of  the  fund  from  April  4,  1837,  to  September  30, 
1906,  is  given  as  follows :  ^ 

Principal  of  mortgages  on  lands  bid  in  for  the  state  at  fore- 
closure sales $929,245 

Principal  received  on  resale  of  lands  bid  in 487,808 

Principal  lost  on  resale  of  lands  bid  in 168,819 

Principal  of  mortgages  on  lands  bid  in  remaining  unsold 272,617 

Principal  lost  on  foreclosures  sales  by  commissioners 56,047 

Principal  lost  by  failure  of  title 33,976 

Principal  lost  by  defalcations  of  commissioners   44,804 

No  words  of  condemnation  could  be  stronger  than  passages 
which  we  find  in  some  of  the  reports  of  recent  comptrollers, 
of  which  the  following  is  a  good  illustration. 

"  This  system,  which  is  not  worthy  the  name  of  financial 
system,  this  hodgepodge  of  poor  and  insufficient  laws,  with 
incompetent  and  careless  loan  commissioners,  has  cut  down 
the  educational  revenue  of  the  state  hundreds  of  thousands 
of  dollars  and  has  been  condemned  by  nearly  every  comp- 
troller for  the  last  thirty  years. 

1  Ibid.,  1907,  p.  264. 

2  Ihid.,  1909  p.  xxxix. 


2 


274       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [^^g 

The  affair  seems  now  to  be  in  a  fair  way  of  settlement, 
and  within  a  few  years  the  fund  will  all  be  invested  in 
securities.  The  average  annual  net  revenue  received  for 
the  twenty-eight  years  from  1839  to  1866  was  $248,101,  or 
6.2  per  cent,  while  the  average  for  twenty-nine  years  from 
1880  to  1908  was  only  $171,757,  or  4.3  per  cent,  and  if 
separate  years  were  taken  the  amount  would  be  still  less. 
While  the  actual  rate  called  for  by  statute  is  five  per  cent, 
the  actual  net  receipts  after  deducting  the  amount  trans- 
ferred to  make  up  the  losses  sustained  through  foreclosure 
is  much  below  this  and  in  1907  amounted  to  only  3.8  per 
cent.  Experience  has  demonstrated  that  the  returns  from 
mortgages  do  not  net  the  state  as  much  as  the  returns  from 
bonds  in  which  a  large  part  of  the  fund  is  now  invested. 
The  income  has  been  applied  to  educational  purposes. 

A  complicated  system  of  transfers  between  this  fund  and 
the  Common  School  Fund  and  the  Literature  Fund  existed 
down  to  the  year  1906.  The  transfers  were  made  to  ob- 
viate the  necessity  of  making  out  three  separate  checks  in 
favor  of  schools  which  drew  money  from  all  three  funds. 
From  1839  to  1880,  $165,000  was  annually  transferred 
to  the  revenues  of  the  Common  School  Fund.  From  1839 
to  1884  there  was  annually  transferred  from  this  fund  to 
the  Literature  Fund  $28,000,  and  since  that  date  the 
amount  has  varied  somewhat.  The  remainder  left  after 
making  these  transfers  was  appropriated  to  the  capital  of 
the  Common  School  Fund  down  to  1846  when  by  a  consti- 
tutional provision  this  was  fixed  at  $25,000  annually  and 
this  sum  has  been  continuously  paid  down  to  1912.  Each 
year  there  was  transferred  from  the  annual  revenue  to  the 
capital  of  this  fund  an  amount  sufficient  to  make  good  the 
diminution  on  the  loans  through  foreclosure  of  mortgages, 
which  sum  varied  from  a  few  thousands  to  in  some  cases  a 
hundred  thousand  dollars  a  year.   The  total  sum  thus  trans- 


^gg-j  STATE  FUNDS  275 

f erred  during  the  history  of  the  fund  has  been  about  $1,- 

(300,000. 

The  net  revenue  from  the  fund  is  now  transferred  di- 
rectly to  the  General  Fund  to  be  used  for  educational  pur- 
poses, with  the  exception  of  $25,000  which  the  constitution 
requires  shall  go  to  increase  the  capital  of  the  Common 
School  Fund.  The  revenue  for  the  year  ending  September 
30,  19 1 2,  was  $179,624. 

College  Land  Scrip  Fund,  186^  to  iSg^,  and  Cornell 
Endowment  Fund,  1868  to  1880. — These  funds  were 
created  out  of  the  proceeds  of  the  land  donated  by 
the  United  States  to  the  various  states  July  2,  1862, 
on  condition  that  the  states  should  provide  colleges 
for  the  advancement  of  agricultural  and  mechanical  arts 
and  by  the  gifts  of  Ezra  Cornell.  The  comptroller  was 
authorized  to  sell  these  lands  and  to  invest  the  proceeds  in 
United  States  and  state  securities,  and  to  pay  all  expenses 
connected  with  this  sale  and  investment  out  of  the  state 
treasury. 

New  York's  share  of  this  scrip  amounted  to  990,000 
acres,  much  of  which  was  located  in  the  pine  timber  region 
of  Wisconsin  and  Minnesota.  Ezra  Cornell  was  appointed 
agent  to  sell  this  land.  A  contract  was  entered  into  between 
him  and  the  state  whereby  he  agreed  to  pay  thirty  cents  per 
acre  on  the  transfer  of  the  scrip  and  to  pay  to  the  state  all 
the  net  profits  arising  from  all  sales  and  leases  of  the  land. 
The  expenses  of  locating  and  selling  this  land  amounted  to 
$201,680.  From  the  gross  receipts  of  the  sales  was  de- 
ducted the  original  thirty  cents  per  acre,  the  expenses  of 
locating  and  selling,  taxes  and  interest  at  seven  per  cent, 
and  the  remainder  constituted  a  separate  fund,  known  as 
the  Cornell  Endowment  Fund.  The  income  was  originally 
appropriated  to  People's  College  in  Schuyler  County,  on 
the  condition  that  within  three  years  this  college  should 


276       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [600 

meet  certain  requirements  specified  in  the  act.  In  1865, 
Cornell  University  was  established  and  the  income  was 
later  appropriated  to  this  university.  The  capital  of  the 
Cornell  Endowment  Fund  amounted  to  $97,200  in  1868, 
and  was  gradually  increased  by  subsequent  addition  to 
$128,596.  In  1880,  all  the  securities  belonging  to  this  fund 
were  transferred  to  the  trustees  of  Cornell  University  and 
the  fund  was  closed.^  Since  1890,  the  United  States  has 
paid  to  Cornell  University  annually  for  instruction  in  agri- 
culture the  sum  of  $50,000,  and  this  has  been  annually  ap- 
propriated to  the  university.^ 

The  College  Land  Scrip  Fund  was  established  in  1867 
by  issuing  seven  per  cent  state  stock  to  the  amount  of 
$64,000  and  by  the  gift  of  Ezra  Cornell  of  $170,000.  It 
was  increased  year  by  year  through  the  proceeds  of  the  sale 
of  the  lands  donated  by  the  United  States  until  it  amounted 
to  $473,403,  at  which  figure  it  remained  from  1871  to  1894. 
In  1895,  it  was  again  increased  by  a  gift  from  Ezra  Cornell 
of  $129,600,  and  by  premiums  on  sale  of  bonds  of  $84,567, 
which  brought  the  total  up  to  $688,576.  In  1895,  the  se- 
curities were  sold  and  the  proceeds  were  transferred  to  the 
General  Fund,  with  the  provision  that  the  state  should  pay 
to  Cornell  University  five  per  cent  interest  on  the  amount 
transferred.^ 

Free  School  Fund. — This  consisted  of  an  annual  tax 
levied  upon  the  real  and  personal  property  of  the  state,  the 
proceeds  of  which  were  used  for  educational  purposes.  In 
1902,  the  fund  was  discontinued  and  the  payments  to 
schools  were  thereafter  made  from  the  General  Fund. 

Elmira  Female  College  Educational  Fund. — In  1869, 
the   state   set   apart  $25,333    ^^   a   permanent    fund,    the 

1  Laws  1880,  chap.  317.  2  j^id.,  1891,  chap.  56. 

8  Ihid.,  1895,  chap.  78. 


6oi]  STATE  FUNDS  277 

income  of  which  was  to  go  to  Elmira  Female  College. 
It  was  increased  to  $50,000  the  next  year.  This  was  kept 
as  a  separate  fund  until  July  i,  1884,  when  it  was  trans- 
ferred to  the  college/ 

Trust  Funds 

Bank  Fund. — It  is  not  necessary  to  give  here  an  account 
of  this  fund  which  has  already  been  fully  described  in  the 
previous  chapter  on  the  banking  system. 

Mariners'  Fund. — The  law  providing  for  the  establish- 
ment of  this  fund  was  passed  in  1829,  but  no  account  of 
the  fund  appears  in  the  comptroller's  books  until  1840. 
This  law  provided  that  out  of  the  money  received  by  the 
commissioners  of  health  after  defraying  the  expenses  of 
the  marine  hospital  and  paying  $8,000  to  the  Society  for 
the  Reformation  of  Children  of  Delinquents  in  New  York 
City,  the  balance  should  be  paid  to  the  comptroller,  to  be 
invested  and  called  the  Mariners'  Fund.  Owing  to  mis- 
application of  this  fund  by  Smith  Cutler,  the  health  com- 
missioner, no  money  was  received  to  the  credit  of  this  fund. 
The  fund  arose  from  the  specified  tax  upon  masters,  mates, 
sailors  and  passengers  entering  the  port  of  New  York.  A 
decree  against  Dr.  Cutler  on  behalf  of  the  state  for  $39,809 
was  secured.  On  its  execution  nothing  was  obtained. 
Later  the  banks  where  Dr.  Cutler  kept  his  funds  turned 
over  to  the  state  certain  securities  owned  by  Dr.  Cutler 
which  were  sold  for  $24,013,  and  $5,040  was*  collected  by 
the  attorney-general  on  one  of  Dr.  Cutler's  official  bonds. 
The  new  commissioner  paid  over  the  yearly  balances,  and 
in  1842,  the  fund  amounted  to  $57,212,  consisting  of  state 
stock,  $20,000,  cash  $25,213,  and  a  mortgage  given  by  the 
American  Seamen's  Society  for  $10,000  which  bore  no  in- 

1  Ibid.,  1884,  chap.  443. 


278       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [602 

terest.  The  revenue  was  appropriated  to  the  New  York 
City,  Eastern  and  Northern  Dispensaries,  and  to  the  Hos- 
pital of  New  York  City.  The  lack  of  co-ordination  be- 
tween legislation  and  administration  allowed  the  fund  pro- 
vision to  continue  unnoticed  for  eleven  years. 

Military  Record  Fund,  i8/o-ipio. — In  1865,  the  legisla- 
ture authorized  the  construction  of  a  Hall  of  Military 
Records,  provided  $75,000  should  be  voluntarily  contrib- 
uted for  this  purpose  by  the  people  of  the  state.  The  prin- 
cipal of  this  fund  consisted  of  the  contributions  remaining 
in  the  hands  of  the  state  treasurer,  after  the  Hall  of  Records 
had  been  completed.  The  income  was  used  for  meeting  the 
expenses  of  collecting  military  statistics.  The  annual  in- 
come yielded  was  between  $2,500  and  $3,000.  The  capital 
of  the  fund  amounted  to  $1,714  in  1866,  and  was  subse- 
quently increased  to  $39,121. 

Soldiers'  Allotment  Fund. — This  fund,  consisting  of 
$54.96,  first  appears  on  the  comptroller's  books  in  1864  as 
$36,  and  was  subsequently  increased  to  the  above  amount. 
It  is  carried  on  the  books  from  year  to  year  till  1875  which 
is  the  last  year  it  appeared.  No  mention  was  made  of  the 
fund  in  any  of  the  comptroller's  reports  of  the  period. 

Trust  Fund  for  the  Payment  of  Bounties. — This  fund, 
as  its  name  implies,  was  created  in  1869  for  the  purpose  of 
paying  bounties  to  soldiers,  and  in  that  year  it  amounted  to 
$11,340,  but  was  subsequently  increased  to  $20,830.  It 
also  disappeared  from  the  treasurer's  books  in  1875  without 
any  mention  of  the  cause. ^ 

Metropolitan  Police  Fund,  Board  of  Health  Fund,  and 
Fire  Department  Fund,  1857-1815. — These  funds,  while 
appearing  on  the  books  of  the  comptroller  as  trust  funds, 
were  not  trust  funds  in  any  real  sense,  for  the  state  simply 

1  Laws  1869,  chap.  756. 


603]  STATE  FUNDS  279 

acted  as  agent  for  the  metropolitan  district.  It  received 
the  moneys  paid  in  for  these  purposes  and  paid  them  out 
immediately  upon  the  warrant  of  the  commissioners  of  the 
several  boards.  Although  the  amount  swelled  the  aggre- 
gate of  the  debit  and  credit  accounts  of  the  treasury,  the 
treasury  was  in  no  way  affected  by  them,  and  there  were 
no  funds  to  be  administered. 

The  Metropolitan  Police  Department  was  created  in 
1857,  and  the  receipts  and  expenditures  were  included  in 
the  comptroller's  report  until  1869.  The  Fire  Department 
and  Board  of  Health  were  created  in  1865  and  1866  re- 
spectively, and  continued  to  be  carried  on  the  comptroller's 
book  until  1869  and  1875  respectively.* 

Women's  Monument  Fund. — This  fund,  consisting  of 
$42,  was  received  in  1887  from  a  G.  A.  R.  Post.  The  ob- 
ject of  this  'deposit  is  not  reported.  The  fund  remained 
unchanged  until  1898,  when  it  was  paid  to  the  Soldier's 
and  Sailor's  Home  at  Bath,  N.  Y.^ 

Public  Administrator's  Fund. — This  consists  of  amounts 
received  from  escheated  estates  and  the  rent  from  real  es- 
tate, and  amounted  to  $287,993  i"  19 12. 

Twenty-Year  Court  and  Trust  Fund. — This  consists  of 
the  sums  which  have  been  in  the  Court  and  Trust  Fund  for 
a  period  of  twenty  years,  and  which  are  then  paid  into  the 
treasury. 

Retirement  Fund  for  State  Hospital  Employees. — The 
comptroller  is  authorized  to  deduct  and  to  retain  monthly 
from  the  salaries  of  employees  in  the  state  hospitals  for 
the  insane  certain  sums  which  are  to  constitute  a  perma- 
nent fund  for  the  payment  of  annuities  to  such  employees. 

1  Ibid,,  1857,  chap.  s6g;i865,  chap.  249;  1866,  chaps.  686  and  74. 

2  Ihid.,  1898,  chap.  606. 


28o       PINANCIAL  HISTORY  OF  NEW  YORK  STATE      [604 

The  comptroller  is  custodian  of  these  funds.     The  amount 
of  the  fund  was  $30,881  in  1912/ 

General  Fimd  Debt,  Sinking  Fund. — The  General  Fund 
Debt  arose  from  the  fact  that  the  state  issued  stock  to  rail- 
roads which  failed  and  also  from  the  fact  that  the  state's 
expenses  exceeded  its  revenues,  and  that  temporary  loans 
were  secured  either  from  sinking  funds  or  from  trust  funds, 
in  return  for  which  comptroller's  bonds  were  issued.  The 
following  table  will  show  the  character  of  the  debt  as  it 
existed  in  1855  : 


2 


General  Fund  State  Debt—September  30,  1855 

State  stock  issued  to  J.  J.  Astor,  5  %  $561 ,500 

State  stock  issued,  deficiency  in  General  Sinking  Fund....  791,068 

State  stock  issued  to  railroads,  at  4^,  5>^  and  6 3,665,700 

Comptroller' s  Bonds,  usually  at  6  % 

Loans  from  railroad  sinking  funds 38,085 

Loans  from  Common  School  funds 451 ,645 

Loans  from  U.  S.  Deposit  Fund 438, 134 

Loans  from  Delaware  Academy 4,825 

Stock  issued  for  Indians'  benefit  36,000 

Stock  issued  for  claims  of  Canal  Fund 385,000 

Temporary  Loans     198,000 

Indian  Annuities 122,695 

Total $6,692,652 

The  General  Fund  Debt  Sinking  Fund  was  created  by 
Art.  7,  Sec.  2,  which  provided  for  an  annual  contribution 
of  $350,000  until  the  time  when  a  sufHcient  sum  had  been 
appropriated  to  pay  the  interest  and  principal  of  the  Canal 
Fund  and  after  this  period  $1,500,000  was  to  go  to  this 
fund.     The  contributions  to  this  fund  were  paid  in  full  in 

*  Laws  1912,  chap.  29. 

*  A.  R.  Comptroller  1856,  pp.  20,  21,  22. 


6o5]  STATE  FUNDS  28 1 

1873,  but  owing  to  the  fact  that  this  money  had  been  di- 
verted from  its  intended  purpose  and  expended  in  paying 
appropriations,  the  debt  remained  in  existence.  In  1874,  it 
was  found  that  $3,988,526  of  the  money  belonging  to  the 
General  Fund  Sinking  Debt  had  been  expended  in  anticipa- 
tion of  taxes.  The  affairs  of  this  fund  were  soon  after  ad- 
justed, and  in  1874  an  amendment  to  the  constitution  pre- 
vented the  recurrence  of  this  condition  of  affairs.^  The 
debt  was  finally  paid  off  in  1878,  and  there  remained  a 
balance  of  $11,463.  Of  this  sum  $8,882  was  transferred 
to  the  Long  Island  Railway  Sinking  Fund,  to  provide  for  a 
deficiency  which  existed  owing  to  the  refusal  of  the  rail- 
road to  pay  the  premium  on  the  coin  purchased  to  pay  its 
debt,  and  the  remainder  of  $2,581  was  transferred  to  the 
General  Fund.^ 

The  Bounty  Debt  Sinking  Fund. — The  Bounty  Debt 
Sinking  Fund  was  created  to  pay  off  the  debt  incurred  by 
the  state  for  bounties  to  enlisted  men  during  the  Civil  War, 
and  the  annual  contributions  to  this  fund  were  raised  by 
taxation,  and  are  shown  in  the  following  table : 

Year  Rate  Amount 

1866 2%  $3, 188,785 

1867 3  4,892,477 

1868 2^  3,749,996 

1869 2]i  4,101,566 

1870 2>i  4,096,280 

1871 2  4,022,974 

1872 2  4,093,710 

1873 2  4,174,068 

1874 2  4,251,843 

1875 2  4,640,849 

1876 Yz  805,647 

The  principal  of  this  fund  fell  due  in  April,  1877,  at 
which  time  the  cash  in  the  fund  was  sufficient  to  meet  the 

1  Art.  vii,  sec.  13.  "^  A.  R.  Comptroller  1879,  p.  11. 


2S2        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [606 

obligations  with  the  remainder  of  $229,193.  This  amount 
was  transferred  to  the  General  Fund  Debt  Sinking  Fund. 
The  last  payment  of  $3,055  was  made  April,  1884,  when 
the  account  of  the  fund  was  closed. 

Railroad  Sinking  Funds. — Several  railroad  companies 
to  which  loans  of  state  stock  had  been  made  were  required 
to  pay  into  the  treasury  annually  two  per  cent  on  the 
amount  loaned  to  them  respectively  as  a  Sinking  Fund  for 
the  ultimate  payment  of  the  debt.  In  1842,  the  following 
sinking  funds  were  maintained :  Tonawonda  Railroad  Com- 
pany, Tioga  Coal,  Iron  and  Manufacturing  Co.,  Hudson  & 
Berkshire  R.  R.,  and  Auburn  &  Rochester  R.  R. 

Saratoga  Springs  State  Reservation  Fund. — The  state 
has  authorized  the  issuance  of  bonds  to  the  amount  of 
$950,000  for  the  purpose  of  purchasing  land  in  the  town  of 
Saratoga  Springs.  Ninety-five  thousand  dollars  is  payable 
annually  from  19 13  to  1922. 

Palisades  Interstate  Park  Debt  Sinking  Fund. — In  1910, 
a  loan  of  $2,500,000,  at  four  per  cent,  was  negotiated  for 
the  purpose  of  developing  the  Palisades  Interstate  Park. 
The  debt  is  redeemable  in  1961.  The  annual  contributions 
to  the  sinking  fund,  amounting  to  $126,515.97,  are  paid 
from  the  General  Fund.^ 

Highway  Debt  Sinking  Fund  No.  i. — This  was  created  to 
redeem  the  $1,000,000  of  fifty-year  three  per  cent  bonds 
issued  in  1906.^    In  19 12,  the  fund  amounted  to  $598,247. 

Highway  Debt  Sinking  Fund  No.  2. — This  fund  is  for 
the  purpose  of  redeeming  the  $33,000,000  of  highway  im- 
provement four  per  cent  bonds  which  have  been  issued  in 
pursuance  of  the  law  of  1906  and  amendments.  It 
amounted  to  $3,687,469  in  191 2. 

Canal  Sinking  Funds. —  (i)  For  redeeming  the  $2,000,- 

1  Laws  1910,  chap.  363  and  1911,  chap.  868.  *  Chapter  469. 


6o7]  STATE  FUNDS  283 

000  of  three  per  cent  bonds  issued  for  the  construction  of 
the  Erie,  Champlain  and  Oswego  canals  in  1903,  and  re- 
deemable in  1923,  There  was  in  the  sinking  fund  $1,337,- 
360  in  1912. 

(2)  For  redeeming  the  $21,000,000  of  fifty-year  bonds 
issued  in  1906,  1907,  1908  and  1909.  There  was  $14,839,- 
862  in  the  sinking  fund  in  191 2. 

(3)  For  redeeming  the  $40,000,000  of  four  per  cent 
fifty-year  bonds  issued  for  the  construction  of  the  Erie, 
Champlain  and  Oswego  canals  in  191  o,  1911  and  19 12. 
There  was  $894,435  in  the  sinking  fund  in  1912. 

(4)  For  redeeming  the  $3,000,000  of  four  per  cent  fifty- 
year  bonds  issued  for  the  construction  of  the  Cayuga  and 
Seneca  Barge  Canal. ^  There  was  $180,184  in  the  sinking 
fund  in  191 2. 

(5)  For  redeeming  the  $3,407,000  of  thirty-year  four 
per  cent  bonds  issued  in  1912  for  the  construction  of  Barge 
Canal  terminals.  There  was  $24,283  in  the  sinking  fund 
in  19 1 2. 

Funds  Maintained  Apart  from  Treasury  Funds.  William 
Vorce  Fund,  ipo2-ipi2, — This  fund  was  established  in 
1902,  under  the  provision  of  William  Vorce's  will,  which 
bequeathed  certain  securities  to  create  a  fund,  the  income 
of  which  was  to  be  expended  for  the  benefit  of  education 
in  the  towns  of  Ellery,  Chautauqua  and  Westfield.  The 
will  stipulated  that  the  fund  should  be  administered  by 
the  state  comptroller.  Under  the  provision  of  the  law  of 
1902,  the  securities  and  cash  in  this  fund  were  to  be  main- 
tained by  the  comptroller  apart  from  the  treasury  funds. 
The  amount  of  this  fund  in  1912  was  $134,247.  The  net 
income  is  paid  to  the  commissioner  of  education  who  ap- 
portions it  among  the  towns.  ^ 

1  Laws  1909,  chap.  391.  2  jfjid.,  1902,  chap.  59. 


284       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [608 

Canasaraga  Creek  Improvement  Fund. — This  consists  of 
a  funded  debt  of  $200,000  and  miscellaneous  receipts 
amounting  to  $19,503,  and  is  maintained  by  the  comptroller 
apart  from  treasury  funds.  ^ 

Conclusion 

The  policy  of  establishing  separate  funds  for  special  pur- 
poses may  seem  at  first  thought  to  be  a  wise  measure,  but 
as  it  actually  worked  out  in  practice  in  this  state,  a  worse 
system  could  hardly  be  devised.  It  was  simply  a  book- 
keeping device  which  served  to  confuse  the  accounts  and 
to  make  them  unintelligible  either  to  the  citizen  or  the  legis- 
lator. The  Canal  Fund  was  under  the  special  care  and 
supervision  of  commissioners,  and  was  kept  as  nearly  as 
possible  separate  from  the  rest  of  the  state  funds.  The 
capital  and  revenue  of  all  the  other  funds,  however,  were 
collected  and  blended  together  in  the  state  treasury.  Out 
of  this  money  all  warrants  drawn  by  the  comptroller  ac- 
cording to  law  were  paid  without  reference  to  the  source 
from  which  the  money  was  received.  At  the  close  of  the 
fiscal  year,  the  accounts  of  each  separate  fund  were  ascer- 
tained and  stated. 

The  confusion  arising  from  the  maintenance  of  separate 
funds  resulted  in  counting  the  same  item  two  or  more 
times,  and  thus  the  figures  for  total  receipts  and  expendi- 
tures were  much  larger  than  they  should  have  been.  This 
is  well  illustrated  in  the  following  table  which  shows  the 
amount  of  capital,  the  annual  revenue,  and  the  annual  pay- 
ments from  the  various  funds  in  the  year  1842.^ 

*  Laws  1909,  chap.  56, 

*  A.  R.  Comptroller  1842. 


609]                                    STATE  FUNDS  285 

Annual  Annual 

Fund  Capital              Revenue  Expenditure 

General $938,198  $1,205,368 

Common  School $1,968,291               255,092  275,089 

Literature 268,991                 47»50i  49»790 

Bank  3i5,i55                22,800  6,000 

U.  S.  Deposit 4,014,521               311,737  276,453 

Mariners 57,2i2                 14, 730  13,866 

Railroad  Sinking 

Tonawanda 2,426                   1,584  1,626 

Tioga  C,  etc 816                        35  116 

Hudson,  Berkshire 6,511                   3,251  3,251 

Auburn  &  Rochester 8,682                  4,335  4,335 

Canal  Funds 

Erie  &  Champlain 1,708,406  1,708,406 

Oswego 36,020  36,010 

Cayuga  &  Seneca I7»993  1 7,993 

Crooked  Lake 1,217  1,217 

Chemung 7,206  7,206 

Chenango I5,33i  I5,33i 

Genessee  Valley 12,075  12,075 


$3,397,504  $3,634,133 

The  total  receipts  for  the  General  Fund  amounted  to 
$938,198,  whereas  the  receipts  from  all  funds  swelled  the 
total  to  $3,397,504.  In  the  latter  is  included  $1,003,536, 
which  represents  simply  the  amount  of  capital  belonging  to 
the  Common  School,  Bank  Fund  and  U.  S.  Deposit  Fund, 
which  happened  to  be  paid  into  the  treasury  during  the  year 
and  which  should  not  be  considered  as  a  part  of  the  annual 
receipts.  Furthermore,  the  following  transfers  between 
funds  were  counted  twice.  The  revenue  of  the  U.  S.  De- 
posit Fund  is  given  as  $311,737,  out  of  which  was  paid  to 
the  Common  School  Fund  Revenue  $165,000,  and  to  the 
Literature  Fund  Revenue  $28,000,  but  these  sums  were  also 
included  in  the  revenue  as  stated  for  these  two  funds ;  that 
is,  the  actual  revenue  of  the  Common  School  Fund  was 
only  $90,092,  and  of  the  Literature  Fund  only  $19,501. 


286       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [6io 

There  would  seem  to  be  no  good  reason  for  keeping  three 
separate  educational  funds  at  the  present  time  when  the 
revenues  from  all  are  simply  transferred  into  the  General 
Fund.  It  makes  extra  work  for  the  already  overburdened 
comptroller's  department  and  serves  to  complicate  and  to 
render  unintelligible  the  annual  reports. 


CHAPTER  XII 
Conclusion 

The  machinery  of  the  state  government  has  been  used 
to  accomplish  those  ends  which  could  not  be  achieved 
by  the  activities  of  individuals.  During  the  early  de- 
cades these  ends  were  four  in  number  in  addition  to 
the  usual  functions  of  government:  (i)  To  hasten  the 
development  of  the  state  by  an  energetic  population 
through  a  sale  of  public  land;  (2)  to  supply  capital;  (3) 
to  provide  transportation  facilities,  and  (4)  to  regulate 
banks  so  that  this  business  might  be  conducted  in  a  just 
and  equitable  manner. 

If  we  judge  the  success  of  these  policies  by  the  crite- 
rion of  net  income  derived  from  them,  we  must  conclude 
that  they  were  not  successfully  managed.  But  if  we  con- 
sider them  from  the  larger  standpoint  of  public  utility, 
we  must  conclude  that  their  success  cannot  be  measured. 
They  resulted  unquestionably  in  a  flourishing  condition 
of  private  industry.  In  modern  times  the  public  revenue 
is  derived  from  taxes  imposed  upon  the  private  indus- 
tries of  its  citizens,  and  therefore  the  more  flourishing 
the  private  industries  are,  the  larger  is  the  fund  from 
which  the  state  may  draw  its  revenue.  Viewed  from 
this  standpoint,  we  may  conclude  that  the  policies 
adopted  by  the  state  in  disposing  of  her  public  lands,  in 
loaning  capital  and  in  constructing  canals  were  sound 
financial  policies,  since  they  resulted  in  increased  effi- 
ciency of  private  industry. 

611]  287 


288       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [612 

On  the  other  hand,  we  must  recognize  the  fact  that 
these  financial  poHcies  violated  another  fundamental 
axiom  of  a  sound  financial  system,  which  is  that  the  ser- 
vices rendered  by  the  state  shall  be  at  the  least  possible 
cost.  The  political  restraints  established  by  the  consti- 
tution were  woefully  inadequate  to  secure  this  end,  and 
furthermore  financial  policies  adopted  by  the  legislature 
were  not  based  upon  sound  fiscal  principles.  The  state's 
lands  and  capital  were  distributed  in  too  lavish  a  manner. 
Investment  of  capital  in  canals  was  unnecessarily  gen- 
erous, and  the  scheme  was  undertaken  on  a  scale  of  too 
great  magnitude.  This  is  inevitably  the  result,  where 
each  member  of  the  legislature  must  account  to  his  con- 
stituency for  his  vote,  and  where,  in  consequence,  he  will 
endeavor  to  secure  the  adoption  of  those  policies  which 
contribute  directly  to  the  prosperity  of  his  own  constit- 
uents. The  total  absence  of  any  provision  for  paying 
the  principal  of  the  rapidly  accumulating  debts,  the 
failure  to  take  into  account  a  possible  reduction  of  the 
tolls,  or  to  allow  for  the  costs  of  maintenance  and  re- 
pairs and  operating  expenses,  shows  inexcusable  igno- 
rance of  sound  fiscal  principles.  Such  being  the  inev- 
itable results  of  expenditures  made  by  popular  legislative 
bodies,  it  behooves  democratic  people  to  exercise  a  wise 
conservatism  in  entering  the  field  of  industrial  and  com- 
mercial undertakings. 

Two  things  are  clearly  brought  out  in  this  period.  The 
first  is  that  the  sense  and  feeHng  of  the  masses  of  the 
people  were  right  in  deciding  as  to  what  things  were  for 
their  own  best  interest.  There  can  be  no  doubt  that  the 
need  for  transportation  and  capital  overshadowed  all 
others.  On  the  other  hand  it  is  quite  as  evident  that  the 
bungling  methods  employed  by  the  legislature  to  fulfill 
these  desires  of  the  people  were  crude  and  unsatisfac- 


613]  CONCLUSION  289 

tory.  These  mistakes,  however,  were  apparent  at  the 
time,  and  all  were  clearly  and  forcefully  presented  by  the 
comptrollers  of  the  period.  If  the  legislature  had  heeded 
the  expert  advice  offered  by  those  versed  in  sound  fiscal 
principles  and  best  qualified  to  judge,  many  of  the  mis- 
takes could  have  been  avoided.  This  leads  naturally  and 
inevitably  to  the  conclusion  that  a  distinction  should  be 
made  between  the  expression  of  a  governmental  policy 
and  the  means  employed  to  carry  out  such  a  policy. 
The  first  is  pre-eminently  the  function  of  the  legislature. 
It,  better  than  any  other,  can  sense  the  feelings  and 
desires  of  the  community  and  can  express  these  desires 
through  the  formation  of  some  desirable  public  policy. 
The  practical  working-out  of  this  policy  in  matters  of 
detail  should  be  left  to  experts,  who,  through  long  train- 
ing and  experience  along  a  particular  line  of  thought  or 
activity,  are  more  competent  to  work  out  an  efficient 
and  economical  system. 

Such  a  division  of  labor  has  long  been  in  practice  in 
all  branches  of  industry  with  marvelous  results  for  good 
and  is  just  beginning  to  be  employed  in  the  field  of 
legislation  and  administration.  The  Interstate  Com- 
merce Commission  is  a  good  example.  After  the  de- 
cision of  the  people  that  railroads  ought  to  be  regulated, 
the  practical  working-out  of  the  details  of  the  plan  has 
been  left  to  a  board  of  experts. 

Some  such  system  should  be  adopted  in  all  our  state 
legislatures.  The  complexity  of  modern  industrial  life, 
its  vast  extent  and  its  ramifications  in  all  fields  of  activ- 
ity make  it  impossible  for  any  one  man  to  be  a  master 
of  the  whole  field.  It  is  absurd  to  expect  the  legislator 
from  an  agricultural  community  to  vote  intelligently 
upon  the  intricate  and  complex  problems  of  our  great 
industrial  centers.     He  is  capable  of  expressing  by  his 


290       FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [614 

vote  the  interests  of  his  community  and  can  thereby  help 
to  formulate  some  sort  of  public  policy  which  has  for  its 
object  the  best  interests  of  the  people  of  the  whole  state ; 
but  the  detailed  system  to  be  embodied  in  law  should  be 
left  to  experts  in  the  particular  field  concerned.  A 
sound  policy  of  public  finance  must  rest  upon  a  thorough 
knowledge  of  political  economy. 

A  long  step  in  this  direction  would  be  made  if  the 
legislature  would  pay  greater  attention  to  the  recom- 
mendations made  by  the  heads  of  departments.  These 
men,  who  have  witnessed  the  workings  of  the  law  in 
their  department,  are  in  a  much  better  position  to  rec- 
ommend alterations;  and,  with  their  intimate  knowledge 
of  the  whole  field,  are  more  competent  to  suggest  new 
laws  which  may  be  needed,  than  is  a  member  of  the  leg- 
islature. Especially  is  this  true  in  matters  of  finance. 
The  comptroller's  reports  are  full  of  suggestions  and 
demands  for  changes  and  alterations — in  some  cases  the 
same  suggestions  have  been  made  by  successive  comp- 
trollers for  decades — but  apparently  no  attention  is  given 
to  these  by  the  legislature. 

During  the  four  decades  1840  to  1880,  the  machinery 
of  the  government  was  little  used  to  regulate  or  to  con- 
trol industries  or  economic  affairs.  The  operation  of  the 
canal  was  the  most  important  economic  function  per- 
formed. A  few  futile  attempts  were  made  to  regulate 
railroads  but  nothing  of  importance  was  accomplished. 

The  last  few  decades  have  witnessed  a  marked  change 
in  the  relation  of  the  state  to  industrial  activities.  In 
the  main  the  tendency  has  been  toward  that  of  regula- 
tion and  control  of  industry  rather  than  that  of  direct 
state  activity  in  the  industrial  field,  although  the  con- 
struction of  highways  and  canals  are  noteworthy  excep- 
tions to  this  rule.     Whenever  the  interest  of  the  people 


6i5]  CONCLUSION  291 

can  be  best  secured  by  state  activity,  as  in  the  purchase 
and  maintenance  of  forest  lands  and  parks  and  reserva- 
tions, the  state  has  not  hesitated  to  enter  the  field. 
The  possibilities  of  governmental  activity  have  been  en- 
larged until  today  there  is  nothing  which  the  whole  com- 
munity wants  which  it  has  not  the  right  to  obtain  by 
state  means.  Nevertheless,  it  is  still  true  that  the  forces 
of  government  have  been  chiefly  directed  toward  curbing 
excesses,  protecting  the  weak,  and  pointing  out  the 
limits  of  aggressive  trade  and  competition.  More  and 
more  the  common  people  are  looking  to  the  government 
to  redress  wrong,  to  alleviate  suffering  and  to  equalize  op- 
portunity. The  new  governmental  departments,  which 
have  been  growing  year  by  year  to  perform  these  func- 
tions, have  been  created  at  additional  cost  to  the  com- 
munity, and  if  the  state  is  to  take  advantage  of  its  pos- 
sibilities in  extending  supervision  and  control  over  every 
phase  of  community  life  it  must  first  of  all  have  a  sound 
financial  system.  During  the  course  of  our  study  the 
need  for  certain  improvements  have  so  often  been  forced 
upon  our  attention  that  we  feel  justified  in  stating  a  few 
of  the  more  important  needs  in  the  form  of  the  following 
recommendations : 

(i)  All  work  performed  by  state  officials  is  public 
business,  and  not  only  should  every  citizen  in  the  state 
have  right  of  access  to  all  public  records,  but  the  re- 
ports of  the  various  officials  should  be  so  clearly  and 
forcefully  presented  as  to  render  them  easily  understood 
by  the  average  intelligent  citizen. 

(2)  The  comptroller,  being  the  chief  financial  officer  of 
the  state,  should  have  complete  control  over  every  ex- 
penditure made  by  the  state ;  and  to  this  end  he  should 
not  only  be  furnished  with  a  duplicate  of  every  invoice, 
but  should  also  receive  a  copy  of  every  order  issued  by 
every  state  official. 


292        FINANCIAL  HISTORY  OF  NEW  YORK  STATE      [6i6 

(3)  The  new  forms  of  accounts  which  are  being 
worked  out  by  the  Bureau  of  Auditor  should  not  only 
disclose  the  accuracy  and  honesty  of  receipts  and  pay- 
ments, but  should  also  offer  data  from  which  to  deter- 
mine the  relative  worth  of  various  expenditures.  Unit 
costs  should  be  acquired  for  the  purpose  of  making  com- 
parisons between  similar  institutions  and  between  various 
years  for  the  same  institution. 

(4)  There  should  be  some  organized  agency  estab- 
lished for  the  sole  purpose  of  making  the  facts  of  admin- 
istration known  to  the  public.  State  admistration  affects 
the  physical,  intellectual  and  economic  welfare  of  every 
individual,  and  the  citizen  should  be  informed  of  all  that 
is  being  accomplished,  so  that  all  may  share  equally  in 
results  of  public  expenditure. 

(5)  The  state  budget  should  be  a  well-planned,  com- 
prehensive scheme  for  the  activities  of  the  state  during 
the  coming  year.  Funds  should  be  appropriated  accord- 
ing to  the  urgency  of  the  needs,  and  the  apportionment 
of  the  funds  among  the  various  state  activities  should 
be  made  only  after  the  most  careful  and  thorough  inves- 
tigation of  the  needs  to  be  met,  the  use  made  of  funds 
previously  appropriated,  and  the  results  obtained  there- 
from. Every  citizen  should  be  made  to  feel  that  he  has 
some  part  in  the  apportionment  of  funds  to  various  ac- 
tivities. 

(6)  An  inventory  should  be  taken  to  find  out  how 
much  property  the  state  actually  owns  and  what  is  the 
present  worth  of  the  state's  property.  In  1910  a  com- 
mittee of  the  commissioners  of  the  land  ofBce  reported 
that  *'  no  list  of  lands  now  owned  by  the  state  is  kept, 
except  that  in  the  comptroller's  office  there  is  kept  a  list 
of  all  lands  acquired  by  the  state  under  tax  sales,  and 
also  of  lands  acquired  by  the  state  on  the  foreclosure  of 


6l7]  CONCLUSION  293 

loan  commissioner's  mortgages,  and  also  in  the  forest 
preserve  counties  a  list  of  lands  acquired  by  the  Forest 
Preserve  Board  by  purchase."'  The  only  statement  of 
the  value  of  the  state's  buildings  is  one  which  gives  the 
amounts  expended  by  the  state  on  these  buildings  at 
various  times  from  1834  to  the  present  time,  which  state- 
ment obviously  gives  no  idea  of  the  present  worth  of  the 
property. 

(7)  All  expenditures  for  new  buildings  and  additions 
to  old  buildings  and  purchase  of  land  should  not  be  paid 
for  out  of  current  revenue,  but  should  be  provided  for 
out  of  bond  issues.  The  length  of  term  of  the  bonds 
issued  should  bear  some  relation  to  the  life  of  the  im- 
provement for  which  they  are  issued,  and  under  the  most 
conservative  estimates  the  term  of  the  bonds  should  at 
least  not  exceed  the  possible  life  of  the  improvement. 

^  A.  R.  Comproller,  1911,  page  46. 


APPENDIX  I 

Classification  of  Expenditures  Used  in  the  Comparative 
Statements  from  1789  to  1912 

I.  executive. 

This  item  is  not  classified  separately  until  188 1  ;  previous  to 
that  year  the  expenditures,  which  migfht  be  classified  under 
this  heading:  are  included  under  the  heading-  Administrative. 

It  includes  the  expenses  of  the  governor,  lieutenant-g:ov- 
ernor,  the  attaches  of  the  governor,  and  the  expenses  of  pro- 
ceedings for  the  removal  of  public  officers. 

2.  administrative. 

From  1789  to  1797  it  was  not  possible  to  separate  the  ex- 
penses of  the  legislature  and  judiciary  from  the  purely  admin- 
istrative department,  and  so  all  three  are  included  under  this 
heading  up  to  the  year  1798,  since  which  time  they  are  classi- 
fied separately.  From  1798  to  1880  it  includes  all  the  ex- 
penses, including  clerk  hire,  salaries  of  assistants  or  deputies, 
postage  and  traveling  expenses  of  the  following  officers  :  gov- 
ernor, lieutenant-governor,  secretary  of  state,  comptroller, 
treasurer,  attorney  general  and  state  engineer.  Since  1880 
the  governor  and  lieutenant-governor  are  classified  under 
**  executive"  and  the  state  engineer  under  ''constructive." 
The  Civil  Service  Commission  and  State  Printing  Board  are 
classified  here  since  their  creation. 

3.  legislative 

This  includes  the  expenses  of  the  Senate,  the  Assembly,  the 
Board  of  Statutory  Consolidation,  in  existence  from  1890  to 
619]  29s 


296  APPENDIX  I  [620 

1901,  and  the  leg^islative  printing:  and  the  publishing:  oi  laws 
since  1880. 

(a)  Printing 

This  sub-item  includes  all  expenses  of  printing:  and  publish- 
ing: laws  from  1/89  to  1880. 

4.   JUDICIAL 

The  courts  and  law  libraries. 

5.    REGULATIVE 

This  includes  the  Banking:  Department,  Insurance  Depart- 
ment, the  Railroad  Commission,  Inspectors  of  Steam  Vessels, 
Superintendent  of  Weig:hts  and  Measures,  Inspectors  of  Ra- 
cing Associations,  State  Assessors,  the  State  Board  of  Tax 
Commissioners,  the  Public  Service  Commission,  the  Depart- 
ments of  Excise,  Health  and  Labor,  Factory  Inspectors, 
Board  of  Arbitration,  Bureau  of  Labor  Statistics,  the  Quar- 
antine Commission,  the  Board  of  Port  Wardens,  Inspector  of 
the  Gas  Meters,  the  Metropolitan  Election  Bureau,  State 
Board  of  Audit,  and  the  Commission  on  Fisheries.  Since 
1880  the  Banking:  and  Insurance  Departments  are  classified 
under  *' g:eneral "  and  the  Commission  on  Fisheries  under 
"  protective  expenditures." 

(a)  Public  Health 
From  1792  to   1829  payments  were  made  to  the  commis- 
sioner of  health  and  to  the  hospital  in  New  York  City  ;  the 
sums  included  under  the  sub-item  from  1857  to  1880  are  the 
amounts  paid  for  quarantine. 

6.    EDUCATIONAL 

The  items  g:iven  under  this  head  do  not  represent  the  total 
amount  spent  by  the  state  for  educational  purposes,  until  the 
year  1904.  The  total  amount  was  not  g:iven  in  the  comptrol- 
ler's reports  and  could  be  obtained  only  by  a  long:  and  tedious 
computation  involving:  the  various  payments  from  the  various 
trust  funds.     These  fig:ures  are  those  found  in  the  reports. 


621]  APPENDIX  I  297 

During:  the  early  years  small  contributions  were  made  to 
various  institutions  such  as  Columbia  Colleg-e,  to  the  professor 
of  anatomy  in  Columbia  Colleg^e,  to  the  College  of  Physicians 
and  Surg^eons,  to  the  regents  of  the  University,  to  the  public 
library,  etc.  Beginning-  in  1800  appropriations  were  made  for 
the  support  of  common  schools,  but  the  chief  reliance  was 
placed  upon  the  revenues  from  the  trust  funds  which  were  ap- 
propriated directly  to  various  educational  purposes.  The  rev- 
enue from  the  U.  S.  Deposit  Fund  was  transferred  to  the  com- 
mon School  and  Literature  fund,  and  the  revenue  of  the  former 
went  to  the  support  of  common  schools,  Indian  schools  and 
normal  schools,  and  of  the  latter  fund  to  academies.  The  rev- 
enue from  other  funds,  such  as  the  College  Land  Script  Fund, 
the  Cornell  Endowment  Fund  and  Elmira  College  Fund  went 
directly  to  Cornell  College  and  Elmira  College.  In  addition 
to  these  sources,  a  state  tax  was  levied  for  school  purposes, 
which  constituted  the  Free  School  Fund.  The  payments  from 
this  fund  are  given  from  1870  to  1903,  when  it  was  discon- 
tinued, and  since  that  time  the  support  of  the  common  schools 
has  been  made  out  of  the  General  Fund.  The  revenue  from  the 
above-mentioned  trust  funds  are  now  transferred  to  the  Gen- 
eral Fund.  The  item  includes  the  Department  of  Education, 
the  normal  schools,  the  education  building,  the  state  historian, 
the  State  Library,  the  State  Museum,  the  State  School  of  Clay 
Working  and  Ceramics,  the  regents  of  the  University  and  Cor- 
nell University.  Since  1880  Cornell  University  has  been  class- 
ified under  "Agricultural." 

7.  Agricultural 

The  small  sums  appropriated  during  the  early  years  were 
for  distribution  as  prizes  among  the  various  county  agricul- 
tural societies.  Later  it  includes  the  Dairy  Commission,  the 
Dairymen^s  Association,  experiment  stations,  the  Department 
of  Agriculture,  the  State  Fair  Commission,  the  State  Veter- 
inary College,  the  College  of  Agriculture,  St.  Lawrence  Uni- 
versity. 


298  APPENDIX  I  [^22 

S.  Defensive. 
Early  appropriations  were  made  to  the  Commissioners  of 
Fortifications,  to  Brigfade  Inspectors,  Commissionary  Dept. 
etc.     It  includes  the  National  Guard,  Arsenals  and  Armories, 
the  Armory  Commission. 

9.  Penal. 

The  fig^ures  g^iven  under  this  heading:  are  incomplete  down 
to  1854  since  prior  to  that  year  the  prison  accounts  were  not 
included  in  the  comptroller's  statement  of  receipts  and  expen- 
ditures but  were  attached  to  the  report  as  appendices. 
This  item  now  includes  the  Prison  Department,  Commission 
on  Prison,  Commission  on  Probation,  the  State  Prisons  at 
Auburn,  Clinton,  Great  Meadow,  Sing:  Sing",  the  penitentaries, 
the  State  Hospitals  at  Dannemora  and  Matteawan  and  State 
Farm  for  Women. 

10.  Curative 

Up  to  1880  the  items  which  mig^ht  be  classed  under  this 
heading:  are  included  under  the  heading:  "  Charitable. *'  Since 
1880  the  State  Commission  in  Lunacy  and  the  institutions 
under  its  care  are  classified  here.  These  are  the  State  hos- 
pitals at  Bing:hamton,  1879,  Buffalo,  1871,  Central  Islip,  1909, 
Gowanda,  1894,  Hudson  River,  1867,  King:s  Park,  1896,  Man- 
hattan, 1906,  Middletown.  1871,  Rochester,  1891,  St.  Law- 
rence, 1887,  Utica,  1843,  Willard,  1866,  and  Mohansic  (under 
Construction). 

II.    CHARITABLE 

This  item  includes  the  expenses  of  the  State  Board  of  Char- 
ities, the  fiscal  supervisor,  and  the  following:  institutions 
under  his  care  :  Western  House  of  Refug:e  for  Juvenile  Delin- 
quents, established  in  1846  and  chang:ed  to  State  Ag:ricultural 
and  Industrial  School,  Industry,  1902  ;  State  Institution  for 
feeble-minded  children,  Syracuse,  185 1  ;  New  York  State 
School  for  Blind,  Batavia,  1865  ;  Thomas  Indian  School,  Iro- 
quois,   1875 ;   State    Custodial    Asylum    for    Feeble-minded 


623]  APPENDIX  I  299 

Women,  Newark,  1885  ;  New  York  State  Soldiers'  and  Sail- 
ors' Home,  Bath,  1878  ;  New  York  Training:  School  for  Girls, 
Hudson,  1904,  but  originally  called  House  of  Refugee  for 
Women,  1881  ;  Western  House  of  Refug-e,  Albion,  1890 ; 
New  York  State  Reformatory  for  Women,  Bedford,  1892  ; 
State  Custodial  Asylum,  Rome,  1893  ;  Craig:  Colony  for  Epi- 
leptics, Sonyea,  1894 :  State  Women's  Relief  Corps  Home, 
Oxford,  1894,  State  Hospital  for  the  Care  of  Crippled  and  De- 
formed Children,  West  Haverstraw,  1900 ;  State  Plospital  for 
Treatment  of  Incipient  Pulmonary  Tuberculosis,  Raybrook, 
1900;  State  Training:  School  for  Boys,  1904  ;  Letchworth  Vil- 
lag:e  Asylum,  1907,  orig:inally  called  Eastern  State  Custodial 
Asylum,  1909;  State  Reformatory,  Elmira,  1876;  Eastern 
State  Reformatory,  Napanoch ;  New  York  House  of  Refug:e, 
Randall's  Island,  was  founded  by  the  Society  for  the  Re- 
formation of  Juvenile  Delinquents  in  the  City  of  New  York 
in  1824.  In  addition  to  these,  10  private  institutions  receive 
state  appropriations  and  are  under  the  care  of  the  Board  of 
Charities. 

12.    PROTECTIVE 

Up  to  1880  the  expenditures  for  (a)  public  building:s  g:en- 
eral  and  unclassified;  (b)  public  lands;  (c)  Indian  affairs; 
(d)  monuments  and  exhibits  are  classified  as  sub-items. 
After  1880  all  are  classed  together  and  to  these  are  added  the 
Forest,  Fish  and  Game  Commission,  reservations,  etc. 

13.    CONSTRUCTIVE 

This  includes  the  State  Engineer  and  Surveyor,  the  State 
Architect,  the  Water  Supply  Commission,  the  Department  of 
Highways. 

(a)  Internal  improvements  includes  all  expenditures  except 
those  for  canals,  such  as  roads,  bridges,  draining  swamps,  rail- 
road, dredging  rivers,  etc. 

(b)  Salt  works  includes  sums  paid  out  for  this  purpose. 
These  sub-items  are  classified  separately  only  up  to  1880. 


300  APPENDIX  I  [624 

14.    GENERAL 

Refunds  of  moneys  payable  into  the  treasury  for  account  of 
Banking-  Department,  Insurance  Department  and  excise  re- 
funds, stationery,  twenty-year  court  and  trust  funds,  State 
Racing  Commission. 

(a)  Supervisory  duties  includes  those  payments  in  which  the 
state  simply  acts  as  agent  for  the  smaller  division  or  for  the 
United  States,  as,  for  example,  from  1789  to  1798  the  redemp- 
tion of  paper  money  issued  during  the  Revolutionary  War  was 
a  large  item  of  expenditure,  the  payment  of  the  U.  S.  direct 
taxes  in  181 5  and  1816,  and  again  during  the  Civil  War 
period,  non-resident  taxes,  redemption  of  lands  sold  for  taxes, 
etc. 

(b)  Bounties,  such  as  wolf  bounties,  especially  in  the  early 
period,  bounties  on  wool  to  encourage  sheep  raising,  premiums 
on  silk  to  encourage  this  industry,  bounties  on  coal,  lead, 
gypsum,  salt,  etc. 

(c)  Interest. 

State  Fund  Transactions 

1 .  The  Free  School  Fund  consisted  of  a  state  tax  for  the  sup- 
port of  the  common  schools  and  the  payments  for  this  fund  are 
gfiven  here  from  1870  to  1903, 

2.  Payments  from  the  canal  fund  comprise  payments  to 
Canal  Debt  Sinking  Fund,  payment  out  of  proceeds  of  bonds, 
etc. 

3.  Payments  to  canals  does  not  represent  the  total  expendi- 
ture for  canals,  but  only  certain  appropriations  made  out  of 
the  general  fund  which  were  found  in  the  reports.  The  canal 
fund  was  kept  separately  from  the  other  state  funds,  but  some 
comptrollers  included  the  canal  payments  in  these  annual  re- 
ports and  others  omitted  them. 

4.  Metropolitan  police  fund  is  included  for  only  three  years 
in  1857,  1858,  1859.  The  state  simply  acted  as  agent  for  the 
Metropolitan  Police  District  and  the  payments  have  no  bearing: 
on  the  state's  finances. 

5.  Trust  funds. 


625]  APPENDIX  I  301 

Since  1880  the  payments  of  principal  and  revenue  of  the 
various  trust  funds  are  g-iven  under  this  heading-. 
6.  Highway  Improvement  Fund  Transaction, 
Under  this  heading:  are  included  all  payments  for  construc- 
tion, interest  on  highway  debt,  and  payments  from  the  high- 
way sinking:  fund. 

General  Remarks 

The  sums  set  down  in  the  columns  as  representing:  the 
amount  expended  for  each  item  must  not  be  considered  as  the 
exact  amounts  spent,  but  only  as  a  very  close  approximation 
of  the  true  amount.  There  was  not  only  the  difficulty  of  de- 
ciding where  to  classify  certain  expenditures  which  seemed  to 
be  on  the  border  line  between  two  divisions,  and  this  was 
especially  true  during  the  earlier  years,  but  also  the  danger  of 
overlooking:  some  items  since  the  items  finally  added  together 
to  form  expenditures  for  a  given  classification  had  to  be 
picked  out  a  report  covering  many  pag:es  of  itemized  accounts 
in  which  there  had  been  no  attempt  to  group  them  in  any  log- 
ical way.  After  the  individual  items  had  been  grouped  under 
their  proper  heading:  the  addition  of  these  items  was  subject 
to  error. 

There  is  no  reason  to  suppose  that  the  figures  as  given  in 
the  reports  themselves  included  all  the  receipts  and  expendi- 
tures of  the  state.  The  receipts  and  expenditures  from  prisons 
were  not  included  until  1854.  So  also  the  receipts  and  ex- 
penditures for  the  salt  works  are  not  included  each  year,  and 
the  same  is  true  of  lotteries. 


302  APPENDIX  I  [626 

APPENDIX  I.     Classified  Expenditures — Continued 


I.  General  Expenditures  1789 

1.  Executive 

2.  Administrative 37,i66 

3.  Legislative 

(a)  Printing   3,622 

4.  Judicial 

5.  Regulative  

(a)  Public  Health 

6.  Educational 

(a)  Support  of  Common  Schools  

Agriculture 

Defensive   4,660 

Penal 

Curative 

Charitable  

12.  Protective   

( a)  Public  Buildings 

(b)  Public  Lands  6,516 

(c)  Indian  Affairs 9,484 

(d)  Monuments  and  Exhibits 

13.  Constructive   

(a)  Internal  Improvements. 8,103 

ih)  Salt  Works  

14.  General    

{di)  Supervisory  Duties  67,624 

(b)  Bounties    390 

( c)  Interest    900 

15.  Miscellaneous 23,327 


7. 
8. 

9. 
10. 
II. 


Total  Ordinary  Expenses. . . 
II.  Debt  Payment  

1.  Temporary   

2.  Bonded  

III.  Investments    

IV.  Payments  to  Sinking  Fund 

I.  Bounty  Debt   

V.  State  Funds  Transactions 

1.  Payments  from  Free  School  Fund 

2.  Payments  from  Canal  Fund 

3.  Payments  to  Canals 

4.  Metropolitan  Police  Fund 

5.  Trust  Funds 

6.  Highway     Improvement     Fund 

Transactions 


1790             1791 
41,089          37,285 
1,957        


2,500 


13,429 


20,000 
13,458 
9,100 


2,839 


23,891 

565 

833 

5,832 


7,92s 


2,281 


9.188 
86 

1,675 


4707 


57.731 
562 

348 
2,085 


161,692   135,493   115,948 


8,100 


Total 161,692        143,418       124,048 


02; 

^J 

Ai^ 

tHJSUlA 

I 

303 

APPENDIX  I.     Classified  Expenditures — Continued 

1792 

1793 

1794 

1795 

1796 

1797 

2. 

3. 

(a) 
4. 

45,298 

60,426 

43,194 

49,818 

102,389 

100,605 

"6,'89^ 

■"832 

5. 
(a) 

3,750 

1,000 

11,007 

15,000 

23,917 

11.875 

6. 

19,250 

4,000 

5,625 

9,375 

61,125 

49,999 

(a) 

7. 



1,000 

8. 

17,097 

8,733 

160,075 

58,328 

68,417 

10,433 

9. 

112,500 

87.562 

10. 







II. 

1,000 

7,750 

4,500 

12. 









(a) 

1,516 

Soo 

(b) 

8,038 

34,248 

11,231 

15,382 

44,626 

2,437 

(c) 

1,682 

5,100 

4,459 

25,235 

27,236 

14,240 

(d) 



13. 







(a) 

1,986 

54,625 

5,775 

5,215 

5,7&i 

7,500 

(b) 



14. 

(a) 

72,793 

58,219 

50,775 

56,202 

28,926 

22,125 

(b) 

684 

952 

883 

808 

2,050 

(c) 



15. 

2,943 

5,078 
232,882 

4 

2,555 

1,605 
478,353 

175,037 

293,978 

252,667 

ZiZ,Z26 

II. 

I. 
2. 





III. 

554600 

45,372 

56,750 

57,500 

30,000 

IV. 

I. 





V. 

I. 
2. 
3. 
4. 
5. 
6. 







729,637  278,254  293,978  309,417  535,853  343,326 


304  APPENDIX  I  [628 

APPENDIX  I.     Classified  Expenditures — Continued 

1798  1799  1800  1801  1802  1803 


I. 

2. 

37,521 

28,784 

46,031 

40,588 

23,670 

22,328 

3. 

7ZaZZ 

54,149 

44,866 

42,898 

39,739 

34,199 

Ca) 

1,752 

719 

222 

3,590 

9,899 

1,793 

4. 

5. 

7,596 

9,462 

10,041 

8,201 

17,165 

14,637 

(a) 

14,194 

12,346 

17,750 

13,019 

16,735 

12,500 

6. 

(a) 

4,125 

3,125 

50,122 

1,978 

6,422 

1,200 

7. 

8. 

10,236 

21,765 

1,962 

9,551 

25,485 

9. 

87,168 

17,384 

19,442 

20,591 

36,635 

10. 



II. 

2,886 

17,286 

16,230 

27,912 

37,365 

28,034 

12. 

(a) 

10,500 



44 

(b) 

10,276 

50,700 

15,102 

1,995 

10,542 

1,812 

(c) 

12,669 

12,498 

12,314 

15,532 

20,021 

20,774 

(d) 

800 

13. 





(a) 



6,950 

500 

2,221 

4,730 

(b) 





14. 

(a) 
(b) 

12,759 

• 

16,920 

(c) 

2,400 

13,070 

12,696 

24,847 

15. 

3,327 

24,492 

28,113 
295,194 

22,913 

24,674 
257,148 

25,685 

290,642 

251,765 

228,247 

205,411 

II. 

I. 

41,245 

20,366 

107,305 

112,360 

39,599 

III. 

15,000 



4,000 

13,500 

IV. 

I. 

V. 

I. 
2. 
3. 
4. 
5. 
6. 









346,887  251,765  315,560  335,552  373,508  258,510 


629]  APPENDIX  I  305 

APPENDIX  I.    Classified  Expenditures — Continued 


II. 


III. 
IV. 


V. 


I 

1804 

1805 

1806 

1807 

1808 

1809 

2. 

19,958 

20,550 

19,375 

19,234 

34,906 

31,284 

3. 

41,376 

46,438 

40,903 

47,988 

57,800 

55,354 

(a) 

4,8x6 

9,613 

4,849 

6,702 

8,545 

4- 
5. 

(a) 

18,290 

20,141 

20,031 

20,106 

25,439 

24,180 

15,205 

12,500 

12,500 

12,500 

12,500 

15,498 

6. 
8. 

17,190 

12,709 

24,941 

15,351 

17,017 

22,168 

4,614 

4,967 

34,737 

17,275 

*76,6V8 

'88,845 

9. 

40,253 

35,658 

48,957 

31,034 

43,309 

35,730 

II. 
12 

2>7A^2 

37,126 

36,853 

32,598 

2,718 

27,481 

(a) 

20,000 

25,000 

10,000 

(b) 

47,624 

17,048 

4,716 

10,566 

17,449 

19,242 

(c) 

13,008 

13,245 

11,004 

18,832 

14,914 

14,994 

(d) 

13. 





(a) 

H,23i 

9,482 

26,439 

13,769 

15,910 

13,398 

(b). 

14. 



(a) 

(b) 



2,870 

(c) 



15. 

14.981 

33,639 

24,585 

22,815 

20,539 

18,253 

289,008 

273,116 

309,890 

288,740 

372,664 

379,297 

I. 
2. 

I. 

50,620 

51,353 

109,075 

102,582 

34,314 

105,286 

1,000 

22,000 

19,400 

34,325 

476,161 

142,989 

I. 
2. 
3. 
4. 
5. 
6. 



....... 

;i: 

340,628  346,469  438,365  425,647  883,139  627,572 


306  APPENDIX  I  [630 


APPENDIX 

I.     Classified  Expenditures- 

-Continued 

I 

1810 

1811 

1812 

1813 

1814 

1815 

2. 

^,470 

24,288 

25,994 

32,066 

31,966 

38,745 

3. 

45,227 

51,671 

84,960 

67,848 

98,691 

76,966 

(a) 

4,850 

7,836 

4,055 

21,135 

8,525 

5,989 

4. 

5. 

36,563 

48,374 

58,370 

58,961 

61,142 

64,647 

(a) 

15,259 

16,000 

16,000 

16,000 

16,000 

16,000 

6. 

33,510 

2,847 

500 

48,876 

46,898 

7. 

(a) 

8. 

111,651 

58,435 

195,025 

101,613 

322,275 

132,857 

p. 
10. 
II. 

25,900 

45,740 

31,608 

33,215 

40,640 

42,076 

30,517 

44,139 

38,080 

52,800 

84,440 

45,246 

(a) 

7,912 

2,875 





2,500 

(b) 

24,6^ 

10,473 

3,355 

2,439 

3,792 

19,225 

(c) 

14,979 

15,404 

15,263 

15,451 

16,318 

17,311 

(d) 

13. 

(a) 

19,097 

19,787 

55,851 

43,026 

60,043 

26,121 

(b) 

14. 

(a) 

91,833 

55,656 

784,868 

(b) 

3,840 

4,095 

2,790 

3,790 

5,612 

(c) 



53,158 

59,911 

144,353 

101,657 

166,143 

IS. 

11,793 

48,533 

37,982 

23,252 

17,004 

25,391 

402,345 

455,845 

632,176 

705,282 

970,815 

1,516,595 

II. 

I. 

153,266 

65,000 

1,075 

70,000 

III. 

50,546 

133,542 

58,208 

165,022 

340,456 

451,308 

IV. 

I. 



V. 

I. 
2. 

3. 
4. 
5. 
6. 





'i 



1; 



606,157  589,387  755,384  871,379  1,311,271  2,037,903 


631]  APPENDIX  I  307 

APPENDIX  I.     Classified  Expenditures — Continued 

1816  1817  1818  1819  1820  1821 


I. 

2. 

67,695 

41,334 

41,800 

37,465 

35,943 

26,325 

3. 

93,466 

94,696 

86,297 

101,697 

99,435 

71,704 

(a) 

6,821 

5,072 

(>,Z7(> 

8,336 

10,499 

10,888 

4- 
S- 
(a) 

80,310 

74,351 

72,037 

51,034 

44,797 

28,194 

23,500 

24,104 

22,500 

22,500 

22,500 

22,500 

6. 

56,101 

70,433 

65,920 

79,281 

91,199 

113,220 

(a) 

7. 

6,152 

11,244 

12,242 

8. 

83.992 

32,783 

21,247 

34,287 

37,064 

38,543 

9. 
10. 

II. 

71,216 

95,734 

146,264 

162,570 

71,572 

88,167 

74,195 

46,503 

10,804 

20,780 

10,970 

13,659 

(a) 

7,560 

234 

44 

6,120 

100 

"i,»58 

(b) 

47,559 

57,138 

12,646 

4,491 

8,248 

12,887 

(c) 

21,610 

17,805 

22,753 

18,121 

19,894 

18,151 

(d) 





13. 



(a) 

22,622 

13,298 

41,268 

4,133 

17,809 

23,330 

(b) 





14- 



(a)  365,903 

8,201 

10,512 

18,743 

19,393 

20,134 

(b) 

7,917 

11,727 

8,077 

11,977 

10,484 

22,659 

(c) 

190,298 

138,335 

88,709 

107,730 

86,737 

15. 

39,329 

15,542 

27,997 

22,572 

23,003 

61,647 

I 

,069,796 

799,253 

734,877 

698,968 

641,884 

672,855 

II. 

I. 

577,832 

195,247 

1,980,088 

60,000 

252,096 

210,000 

III. 
IV. 

I. 

2. 

339,490 

204,430 

71,957 

281,926 

101,063 

14,056 

3- 

V. 

I. 
2. 
3. 

21.783 

95,498 

218,690 

168,741 

207,450 

173,773 

4- 
5. 
6. 



2,008,901     1,294,428    3,005.612     1,209,635     i,2Q2,493     1,070,684 


30» 

AF 

PENDIX 

/ 

[632 

APPENDIX  I.    Classified  Expenditures- 

-Continued 

I 

1822 

1823 

1824 

1825 

1826 

1827 

2. 

24,497 

24,552 

32,178 

25,940 

37,086 

40,890 

3. 

85,099 

75,113 

93,929 

78,934 

71,439 

87,975 

(a) 

10,609 

15,386 

11,738 

20,245 

15,852 

12,771 

4- 

5. 

27,362 

20,463 

18,865 

25,482 

21,327 

27,317 

(a) 

22,500 

22,500 

22,500 

22,500 

22,500 

22,500 

6. 

(a) 

87.983 

96,833 

85,783 

85,245 

91,823 

104,907 

7. 

7,220 

8,441 

5,024 

3,213 

1,000 

8. 

17,093 

10,412 

5,406 

7,910 

9,091 

11,265 

9. 

TO 

56,326 

48,624 

43,589 

67,143 

59,994 

44,597 

II. 

11,914 

15,437 

15,633 

16,912 

15,009 

16,601 

(a) 

200 

*'i,586 

"1,266 

■""86 

5,394 

""716 

(b) 

19,254 

39,734 

11,719 

28,366 

41,444 

28,980 

(c) 

20,807 

19,234 

17,395 

17,738 

17,995 

17,992 

(d) 

1,000 

13. 



(a) 

4,839 

4,037 

1,069 

19,386 

45.926 

21,721 

(b) 

14. 



(a) 

33,040 

22,515 

13.746 

23,604 

24,988 

48,328 

(b) 

14,869 

1,635 

1,337 

975 

1,257 

2,228 

(c) 

60,000 

60,000 

44 



IS. 

28,478 
533,090 

11,401 

I3,*68^ 
392.876 

19,592 

34,142 

54,783 

497,903 

463,315 

516,267 

543,571 

II. 

I. 

116,800 

142,108 

828,777 

280,138 

III. 

*'5,'84^" 

20,448 

163,700 

232,000 

*  ■ '  '2i5'l 

IV. 

I. 

2. 
3. 





V. 

I. 

2. 







3. 

268,363 

444,505 

1,103,570 

859,503 

1,036,399 

1,364,515 

4. 

s. 

6. 







924,09s    1,104,964   2,325,223    1,766,656    1,784,666    1,908,347 


633]  APPENDIX  I  309 

APPENDIX  I.    Classified  Expenditures — Continued 

1828  1829  1830  1831  1832  1833 


I. 

2. 

32,489 

45,414 

31,328 

25,056 

31,769 

32,70s 

3. 

125,733 

110,842 

71,253 

75,007 

94,367 

80,597 

(a) 

41,884 

31,796 

13,183 

13,710 

14,234 

19,281 

4. 

5. 

32,605 

25,393 

30,222 

18,579 

Z2,6s7 

28,507 

(a) 

22,500 

22,500 

6. 

104,703 

6,966 

7. 

(a) 



8. 

13,469 

13,113 

10,645 

7,996 

14,483 

9. 

57,488 

60,487 

56,459 

44,831 

39,290 

11,848 

10. 



II. 

19,002 

12,623 

7,7Z7 

8,839 

8,730 

12. 

(a) 
(b) 

""258 
77,393 

""565 
20,713 

18,845 

(c) 

18,024 

17,993 

18,061 

18,144 

20,168 

18,240 

(d) 



13. 





(a) 

30,679 

42,167 

7.836 



18,266 

(b) 

14. 



(a) 

47,878 

50,909 

57,868 

57,183 

93,764 

43,253 

(b) 

4,210 

4,511 

1,455 

(c) 



500 



'em 

28,923 

15. 

44,251 

46,557 
513,049 

56,303 
379,740 

58,787 
319,293 

52,000 

26,625 

672,s66 

393,894 

332,913 

II. 

I. 
2. 



III. 

107,767 

IV. 

I. 
2. 
3. 



V. 

I. 
2. 

....... 



3. 

I 

,208,471 

1,170,080 

35,279 

24,228 

23.178 

73,079 

4- 

5. 

'*''*'* 

1,347,137 

1,553,704 

1,404,566 

1,755,384 

2,009,57a 

6. 



1,988,804   1,860,186   1,968,723    1,748,087   2,172,456  2415,564 


3IO  APPENDIX  I  [534 

APPENDIX  I.     Classified  Expenditures — Continued 


I 

1834 

183s 

1836 

1837 

1838 

1839 

2. 

32,868 

3S,oi8 

37,22"^ 

41,071 

42,048 

52,909 

3- 

84,332 

85,605 

99,434 

103,784 

82,852 

91,921 

(a) 

22,569 

25,358 

35,574 

34,612 

29,664 

27,549 

4. 
5. 

36,920 

30,400 

24,303 

24,553 

24,068 

128,345 

(a) 







6. 

7. 

(a) 





8. 

19,160 

13,536 

12,999 

14,421 

36,581 

16,594 

9. 

9,537 

7,759 

537 

25,467 

3,334 

265 

10. 

II. 

12,194 

21,848 

32,210 

68,084 

89,887 

124,833 

(a) 

41,566 

27,650 

20,002 

18,461 

41,300 

25,691 

(b) 

13,669 





126,432 

(c) 
(d) 

17,872 

21,861 

17,921 

17,796 

18,018 

15,431 

13- 







(a) 

17,575 



(b) 



14- 





(a) 

36,422 

50,876 

79,959 

46,694 

54,156 

41,409 

(b) 

1,305 

756 

(c) 

33,247 

38,293 

41,912 

48,686 

111,969 

123,246 

15. 

38,046 
399,707 

14,528 
389,307 

2,448 
444,530 

88,881 
532,510 

137,449 

72,173 

671,326 

888,178 

11. 

I. 



100,000 

218,951 

III. 

IV. 

I. 
2. 
3. 





V. 

I. 
2. 





3. 

93,881 

44,465 

94,508 

217,385 

229,161 

182,688 

4- 

5. 







6. 



493,588       AZZ,772       539,038       749,895     1,000,487    1,289,817 


635] 


II. 


III. 

IV. 


APPENDIX 

1840 

1.  

2.  39,896 

3.  99,528 
(a)  28,242 

4.  79,290 


7. 
8. 

9. 
10. 
II. 
12. 


13- 


14- 


(a)     22,500 
(a)  '.\'.'.'Z 


28,406 
21,702 


(a)  41,257 

(b)  40,002 

(c)  10,520 

(d)  


(a) 
(b) 


(a)  86,336 

(b)   

(c)  120,243 
158,983 


908,725 
303,500 


385,613 


APPENDIX  I 

I.     Classified  Expenditures- 
1841  1842  1843 


43,273 

111,370 

53,352 

72,683 

22,500 


17,784 
15,351 


44,257 
106,215 

50,311 
93,030 
14,776 

9,255 

"  6,156 
23,916 
14,840 


28,400 

112,903 

39,289 


70,929 
15,355 
8,655 


35,853 
84,330 
36,759 
103,595 
13,035 

4,154 

6,560 
23,498 
18,926 


141,820   110,642    97,703    11,448 


36,708 

88,491 
9,265 


9,565 


125,737  95,499  23,588 

1,840  21,477 

71,082  210,345  191,986 

112,109  54,285  145,908 


936,475   917,367   965,146 
530,000   288,000   290,727 


1,607,838  1,466,475  1,205,367  1,255,873 


-Continued 

1844  1845 

36,026  38,056 

95,856  96,627 

34,848  51,764 

99,833  100,479 

17,354  11,875 

6,216  6,899 

6,0(56  "6,558 

21,567  27,993 

42,560  95,266 

80,920  100,063 

"6,588  8,585 

58,302  61,622 

8,009  9,675 

"3;66i  '.'.'.'.'.'.'. 

37,655  31,528 

92,022  84,944 

36,078  80,627 

294,713  268,633 

25,479  100,550 

1,003,753  1,181,744 

300,000  617,385 

241,884   

278,198  9,606 

1,823,835  1,808,735 


312  APPENDIX  I  [5^5 

APPENDIX  I.    Classified  ExPENDiTUREs--Con/mM^d 


I 

1846 

1847 

1848 

1849 

1850 

I85I 

2. 

36,489 

38,876 

61,075 

64,853 

40,390 

41,764 

3. 

101,250 

93,674 

144,171 

82,290 

96,008 

142,264 

(a) 

69,739 

38,458 

64,935 

75,448 

92,529 

121,448 

4 

100,182 

70,303 

90,449 

109,272 

100,405 

95,918 

5. 

(a) 

10,788 

16,215 

17,400 

19,348 

19,803 

6. 

7,182 

11,921 

8,759 

12,166 

9,238 

*  7.187 

(a) 



7. 

6,968 

7,121 

7,417 

6,563 

7,358 

8. 

99,871 

36,824 

53,769 

50,174 

14,720 

26,141 

9. 

TO 

103,584 

68,532 

138,400 

84,395 

83,490 

70,390 

II. 

128,951 

97,291 

124,779 

152,362 

126,633 

106,485 

(a) 

10,107 

9,152 

16,006 

10,496 

!!!!!;; 

(b) 

29,909 

27,987 

20,392 

13,724 

(c) 

8,521 

(d) 



13. 

(a) 



8,470 

(b) 

18,918 

30,543 

25,520 

29,754 

47,399 

30,000 

14. 







(a) 

62,665 

30,352 

44,259 

24,568 

118,734 

(b) 

20,569 





(c) 

300,770 



1,436 

11,572 

15. 

I 

50,850 
,167.313 

172,022 

82,541 
884,780 

65,667 
827,293 

121,176 

777,340 

91,876 

702,710 

890,940 

11. 

I. 

30,000 

III. 

;;;;;;; 

;;;;;;; 

IV. 

I. 
2. 
3. 







V. 

I. 
2. 
3. 
4. 

s. 

6. 

56,503 

119,410 







1,223,816  822,120  884,780  827,293  807,340  890,940 


6^y]  APPENDIX  I  ^^^ 

APPENDIX  I.     Classified  Expenditures— C{?«/mM^rf 


I 

1852 

1853 

1854 

1855 

1856 

1857 

2. 

66,630 

55,293 

56,226 

64,687 

76,477 

81,761 

3. 

105,386 

138,844 

95,289 

110,995 

80,344 

153.982 

(a)  138,225 

135,364 

128,461 

156.618 

109,549 

109,936 

4. 

95,061 

96,328 

97,875 

97,914 

97,171 

98,052 

5. 

(a) 

19,066 

20,292 

22,956 

21,902 

88,046 

38,50s 
50,018 

6. 

(a) 

59,267 

53,250 

22,017 

31,656 

42,215 

44,996 

7. 

7,027 

7,762 

7,649 

"7,886 

6,043 

7,026 

8. 

52,683 

15,082 

20,553 

14,911 

14,317 

3i,4C9 

9. 
10 

81,365 

101,627 

183,651 

480,266 

270,136 

II. 

T2 

215,933 

192,895 

282,012 

351,434 

227,784 

342,454 

(a) 

14,388 

16,128 

42,803 

9,216 

22,779 

(b) 

24,901 

13,464 

8.747 

8,741 

1,574 

17,988 

(c) 
(d) 



1,676 

1,318 

975 

13. 



(a) 

18,231 

53,819 

56,317 

76,514 

89,646 

(b) 

34,912 

24,827 

25,250 

51,000 

43,000 

111,622 

14. 



(a) 

14,970 

15,474 

35,862 

41,077 

91,193 

35,523 

(b) 

(c) 

16,670 

13,709 

47,468 

31,226 

40,608 

42,<^3 

15. 

I, 

339,349 

88,266 

58,352 

133,016 

72,014 

417,802 

II 

,271,445 

1,005,106 

1,163,991 

1,703,767 

1,297,176 

1,696,192 

I. 

....... 

50,000 

150,000 

287,000 

III. 

*  * 

IV. 
I. 

2. 

3- 



V. 
I. 
2. 



3. 

621,467 

320,000 

262,500 

4- 
5. 
6. 





183,190 

1,271,445   1,005,106   1,785,458   1,753,767   1,767,176  2,428,882 


3H  APPENDIX  I                                     [638 

APPENDIX  I.     Classified  Expenditures— Co w/inM^rf 

1858  1859     i860     1861     1862     1863 

1.    

2.  82,489  83,392    77,306    71,578    73,846  73,108 

3.  139,742  125,905   124,299   116,957   117,071  145,423 
(a)  124,264  158,930   181,797   132,496   102,499  102,253 

4.  105,511  111,000   115,413   123,662   123,808  134,523 

5.  33,475  30,907    50,075    50,227    50,814  61,373 
(a)  11,491  96,359    28,361   

6.  49,864  47,836    25,980    36,746 


(a) 

7.  7,245    8,008    8,186    10,472 

8.  174,448   159,032    52,725   23,016 

9.  311,179   343,398   426,632   388,931 

10.    

II-    368,574   275,750   263,079   253,183 
12.    

(a)  18,211    29,767    40,161    19,965 

(b)  12,734  12,653    14,687 

(c)  1,013    2,217    1,033    1,049 
(d) 

13 

(a)  77,171    12,977    18,295 


19,704 

32,503 

5,767 
854,279 
311,745 

12,868 

5,290,392 

385,542 

256,456 

258,134 

17,069 

4,414 
10,708 

73,624 

1,277 

939 

43,074 

20,300 
34,355 

(b)  89,863  57,556    52,416    63,500 
14.     

(a)  22,647    14,759    33,222    42,071   583,524    45,895 

(b) 

(c)  27,597    26,789  26,789    34,289   174,497   102,444 
15-  106,379   238,246   143,010  2,909,098    81,427   104,458 


II. 


III. 
IV. 


1,763,897  1,822,828  1,681,432  4,291,927  2,837,343  6,879,411 


1.  50,000   150,000   200,000   300,000   

2.    1,240,000  1,505,000 


1.    

2.    

3.  1,240,500  1,730,747  1,421,972   852,552  2,769,623  1,420,188 

4.  1,319,595  1,367,827   

5 

6 


4,373.992  5,071,402  3,103,404  5.344,479  7,146,966  9,804,599 


639]  APPENDIX  I                                        315 
APPENDIX  I.     Classified  Expenditures — Continued 

1864  1865  1866  1867  1868  1869 

1.  

2.  84,036    100,665  152,105    115,372    126,250    162,478 

3.  165,000  198,156    183,041    229,217    260,184    295,294 
(a)  155,715    214,162    193,212    198,651    207,395    192,267 

4.  140,207  142,295    145,028    152,201    156,585    161,273 
5-  69,523     79,207     63,458     78,785     81,414     91,618 

(a)  50,437     50,240    95,562    96,340    239,845    342,495 

6.  29,871  A3,337           44,260     29,964    106,767     78,906 
(a)  

7.  10,917  15,204     9,969     13,613     19,748    25,814 

8.  4,708,397   5,844,461   1,340,337    564,409  375,413    375,921 

9.  409,996    578,909    692,295    896,909  988,188   1,147,052 

10.     

11.  303,579  440,421    565,907    759,482    775,256   1,046,074 

12.     

(a)  36,138  36,038    96,672    32,665    80,881    477,006 

(b)  1,603     3,174    

(c)  1,175      684    

(d)  10,292 

13.     

(a)  149,029  91,206    273,616    143,632    381,811    174,028 

(b)  54,234  49,000    49,184    50,000    50,000    50,000 
14 

(a)  36,150  565,538    83,114    44,109    72,820    123,633 

(b)  

(c)  26,789    665,647   1,554,322    

15.  443,992    125,887    164,593    268,328    280,476    124,870 


II. 


III. 
IV. 


1.  

2.  5,000      2,000,000      1,000,000 


6,876,788      9,244,231      5,706,675      3,703,677      4,203,033      4,846,021 


1.  

2.  

3 3,188,786      4,892,476      3,479,996 


1.  

2.  

3.  535,374        931,779      2,147,614      1,406,817      1,019,266      1,828,400 

4 

5 

6.  


7,417,162  12,176,010   8,854,289   8,299,280  10,114,775  10,424,417 


3l6  APPENDIX  I  [640 

APPENDIX  I.    Classified  Expenditures — Continued 

1870  1871  1872  1873  1874  1875 


11. 


III. 
IV. 


V. 


1 710,117    315,750   1,846,826   725.768 

2.     


1.  2,890,151   3,007,563   3,033,586   3,012,533   3,278,857 

2.     

3.  1,595,053   3,880,035   2,238,096   2,863,070   3,281,985 

4 

5 

6 


I. 

2.  331,381  301,111    311,571    337,928    332,989    301.381 

3.  305,273  422,456    287,855    305,118    240,147    436,115 
(a)  369,660    238,399    311,343    208,232    181,132    166.946 

4.  202,454  361,509    391,365    393,622    400,579    387754 

5.  10,744  29,355    54,378    52,000    48,360    92,821 
(a)  290,644    344,329    241,505    365,329    215,483    62,453 

6.  20,943  26,614    46,577    35,091    37,184    175.375 
(a)  

7.  38,720  19,457    22,593    19,157    17,993    18,262 

8.  309,087    501,555  267,787    495,597    356,i6o    364,594 

9.  981,679    929,884  923,200   1,005,264   1,014,263    963,155 

10.     

11.  1,316,182   1,773,371   2,155,033   1,194,944    796,752   1,172,571 

12.     

(a)  1,252,788  515,413    893,595    121,928    645,754   1,438,383 

(b)  7,882     4,715     4,093 

(c)  2,236    6,090 

(d)  11,445     11,744      200     36,500     6,403    

13.     

(a)  18,864  73,069  .   70,403    77,918    54,096    28,019 

(b)  S4,ooo  55,979    193,642    67,801     70,300    64,000 
14 

(a)  64,358  43,449    134,368    109,560    141,161    41,266 

(b)  

(c)  

15.  134,069    267,77:^        217,319   1,277,373    259,505    202,519 


5,712,527   5,915,647   6,522,734   6,111,244   4,822,976   5,925,797 


10,197,731  13,513,362  12,110,166  13,833,673  12,109,586  11,766,662 


641]  APPENDIX  I  217 

APPENDIX  I.    Classified  Expenditures — Continued 

1876  1877  1878  1879  1880 


I. 

2. 

337,196 

321,001 

362,026 

310,494 

153.074 

3. 

459,078 

418,134 

446,181 

419,715 

391,942 

(a) 

157,079 

103,420 

126,042 

74,666 

108,436 

4. 

343,994 

330,992 

336,897 

326,243 

357,149 

5. 

201,305 

326,684 

282,414 

235,902 

301,824 

(a) 

25,913 

17,500 

38,500 

32,308 

35,771 

6. 

(a) 

57,140 

55,094 

48,103 

99,009 

100,868 

7. 

18,623 

17,944 

17,591 

28,485 

59,172 

8. 

340,619 

333.420 

555,807 

681,807 

483.938 

9. 

980,895 

737,076 

662,366 

729,254 

668,411 

II. 
12 

1,256,922 

1,199,626 

983,451 

1,074,650 

1,229,776 

(a) 

943,503 

768,401 

1,151,847 

1,023,029 

1,057,220 

(b) 

1,305 

1,033 

224 

3,001 

129,178 

(c) 

1,177 

1,362 

1,663 

11,905 

9,062 

13. 

(d) 

2,500 

1,000 

4,000 

(a) 

31,028 

43.110 

34,447 

26,926 

35,704 

14. 

(b) 

72,7Zi 

70,600 

60,000 

60,000 

(a) 

A.'im 

81,838 

83,191 

63,657 

128,192 

(b) 

(c) 



IS. 

108,858 

129,917 

397,194 

298,562 
5,500,613 

26,364 

XL 
I. 
2. 
III. 

5,384,992 

4,957,152 

5,590,444 

5,280,081 







IV. 

I. 
2. 

3. 

V. 

I. 

3,402,460 

3,508,436 

3,544,586 

3,355,8x3 

3,359.218 

3- 
4. 
5. 
6. 

712,820 



900,208 

805,083 

789,725 

9,500,272 

8,105,588 

10,035.238 

9,661,509 

9,429,024 

3l8  APPENDIX  I  [642 
APPENDIX  I.     Classified  Expenditures — Continued 

1881              1882             1883             1884  1885 

1.  Z7,777  36,983           34,409          31,775  32,341 

2.  133,970  125,948         142,127         158,487  162,007 

3.  507,035         457,030        460,334  492,428  469,919 
(a)  

4.  439,901  358,460         369,096        456,527  489,920         489,374 

5.  238,798        278,341  178,762         140,083  145,060         201,659 
(a)  

6.  288,154         274,306         323,070         481,192  471,702         479,593 
(a)  

7.  27,020  75,910          49,524          51,147  97,183         103,734 

8.  305,944        343,204        383,735        496,271  487,123        460,071 

9.  560,876  533,627        548,171         544,382  1,076,327      1,392,063 

10.  228,069  176,137         173,206        125,816  175,310        322,202 

11.  453,074        523,453  585,741         465,888  613,578        807,271 

12.  118,985  127,397         169,866        260,120  396,577        341,047 

(a)  

(b)  1,405,299    300,000 

(c)  

(d)  

13.  1,463,783   1,370,021   1,467,081   1,397,852  973,298    650,926 

(a)  

(b)  

14.  212,234    198,551  174,489    204,882  168,189    294,786 


II. 


III. 
IV. 


(a) 
(b) 
(c) 


15. 


5,015,620   4,879,368   5,059,591   5,305,850   7,163,833   6,747,60s 


1.  500,000 

2.     


1.  2,977,770   3,010,737   3,007,712  3,034,949  3,028,903  3,057,61a 

2.  1,076,245    540,664   2,854,985  2,151,369  1,493,230  1,243,296 

3.  1,149,099    719,564    690,710  832,803  1,002,195  851,516 

4 

5.     589,432   3,105,483   3,868,091  681,928  650,256  618,010 

6 


1,405,299 

1,397,852 

973,298 

204,882 

i68,V89 

5,305,850 

7,163,833 

3,034,949 

2,151,369 

832,803 

3,028,903 
1,493,230 
1,002,195 

681,928 

650,256 

11,308,166    12,255,816    15,481,009    12,006,899    13,338,417    12,518.027 


643]  APPENDIX  1  319 

APPENDIX  I.     Classified  Expenditures — Continued 


1887 

1888 

1889 

1890 

1891 

1892 

I. 

116,984 

45,498 

36,450 

36,095 

35,401 

64,611 

2. 

179,263 

164,147 

174248 

201,863 

214,575 

398,367 

3. 

(a) 
4. 

530,266 

613,458 

661,891 

623,189 

535,964 

658,188 

501,426 

526,823 

554,404 

588,474 

616,538 

642,708 

5. 

213,846 

249,355 

224,620 

445,469 

318,862 

275,069 

(a) 

6. 

470,261 

487,296 

694,278 

527,552 

482,771 

513,495 

(a) 

7. 

122,823 

137,924 

218,059 

224,241 

234,482 

277,261 

8. 

425,275 

546,555 

672,973 

613,321 

528,756 

660,139 

9. 

1,741,298 

2,174,698 

880,002 

1,081,362 

995,550 

952,.So5 

10. 

426,213 

646,290 

688,031 

877,621 

1,069,420 

1,102,779 

II. 

826,294 

1,015,698 

938,072 

958,113 

1,026,26s 

1,007,115 

12. 

372,726 

490,795 

583,086 

411,337 

439.816 

553,139 

(a) 

(b) 

(c) 



(d) 
13- 

(a) 

159,406 

310,472 

546,055 

286,731 

624,117 

905,787 

(b) 



(c) 

14. 
(a) 
(b) 

236,479 

225,011 

273,445 

209,691 

241,582 

329,480 

(c) 
15. 

122,500 

120,000 

117,500 

115,000 

112,501 

110,000 

II. 

6,445,060 

7,754,020 

7,263,114 

7,200,059 

7,476,600 

8,450,943 

2. 

III. 



IV. 

I. 
2. 
3- 



V. 

I. 

3,569,827 

3,578,916 

3,587,633 

3,609,362 

3,883,891 

3,908,899 

2. 

2,401,573 

1,093,534 

478,961 

2,140,992 

2,198,999 

2,291,091 

3. 

1,117,313 

1,444,008 

1,569,029 

1,658,423 

1,462,103 

1,117,553 

4. 
5- 
6. 

927,121 

1,184,035 

654,697 

621,569 

2,395,837 

1,921,729 

14,460,894   15.054,513   13,553,434   15,230,405   17,417,430   17,690,215 


320  APPENDIX  I  [5^ 

APPENDIX  I.    Classified  Expenditures— Con/mM^d 


1893 

1894 

1895 

1896 

1897 

1898 

1. 

44,535 

36,165 

35,214 

53,159 

38,456 

36,-1^4 

2. 

229,047 

253,712 

271,333 

332,053 

325,25s 

354,442 

3- 

fa) 

810,392 

1,198,159 

1,210,454 

1,226,060 

1,062,924 

1,220,067 

4. 

602,710 

616,736 

628,413 

753,646 

836*51*1 

896,757 

5. 

(fl) 

743,059 

448,043 

447,513 

553,734 

710,707 

616,011 

6. 

Ca) 

938,380 

639,956 

602,038 

587,982 

642,991 

576,797 

7. 

291,770 

379,353 

376,081 

429,489 

414,832 

438,849 

8. 

1,008,154 

769,654 

852,728 

739,978 

860,165 

1,629,748 

9. 

891,298 

880,079 

845,549 

698,282 

737,601 

885,078 

10. 

961,976 

2,194,239 

2,501,308 

4,027,494 

5,291,557 

5,036,782 

II. 

1,334,212 

1,233,575 

1,509,410 

1,616,785 

1,708,772 

1,605,826 

12. 

(a) 

583,419 

583,61s 

624,38s 

624,964 

717,420 

1,735,556 

(b)     

(c)     

(d)     

13.  883,108        832,101  216,477        851,199      1,246,206      1,073,104 
(a)     Public  Highways 3,345 

14.  366,549        280,814  345,745         301,629         384,561         615,674 

(a)     

(b)     

(c)  307,500         

IS 


II. 


III. 
IV. 


9,996,109    10,346,201     10,466,648    12,796,454    14,977,907    16,724,480 


1.     350,000   1,600,000   2,800,000    1,000,000 

2.     


1.  3,911,569   3,970,991   4,030,420   4,016,423   4,048,643   4,027,615 

2.  474,044     1,250     1,250    248,860   3,612,536   5,836,443 

3.  1,102,094   1,449,961   1,362,510   1,574,057   1,636,499   1,790,511 

4 

5-    1,333,099   2,788,566   1,124,840   2,743,654   3,353,353   i,537,8so 
6 


16,816,915    18,906,969    18,585,668    24,179,449    27,628,939    30,916,899 


645] 


APPENDIX  I 


321 


APPENDIX  I.     Classified  Expenditures — Continued 


II. 


7. 
8. 

9- 
10. 
II. 
12. 


13. 


14. 


15. 


(a) 

(a) 
(a) 


1899 
50,680 
359,855 
1,216,253 

880,572 
934,488 


1900 
52,877 
433.137 
1,309,547 

975,766 
886,955 


1901 
54,562 
462,043 
1,369,440 

1,012,569 
1,018,480 


1902 

46,317 

449,402 

1,343,369 

1,032,077 
1,017,162 


1903  1904 

51,573  44,568 

414,678  423,321 

1,019,970  1,041,773 


1,009,841 
930,341 


587,062    749,931    871,666    803,416    755,170 


(a) 
(b) 
(c) 
(d) 

(a) 
(b) 

(a) 
(b) 
(c) 


572,504 
1,093,307 

874,149 
4,429,267 
1,801,165 

886,512 


1,009,864 
942,272 
4,761,068 
1,737,282 
1,044,095 


173,350 

43,150 

740,887 


233,150 
166,048 
731,009 


I. 

1,250,000 

2,000,000 

2. 



III. 



IV. 

2. 
3. 



V. 

I. 

3,991,406 

4,317,167 

2. 

852,073 

1,096,994 

3. 

1,325,808 

1,778,333 

4- 

5. 

1,242,535 

995,864 

6. 

23,305,023 

25,884,757 

721,448 

757,139 

900,567 

4,803,196 

1,944,441 
1,026,296 


225,841 
238,429 
594,721 


4,201,341 
1,326,778 
1,981,963 


1,086,920 


724,894 

781,530 

1,076,245 

4,686,363 

1,822,306 

731,589 


726,108 
971,698 
725,932 
4,680,788 
1,857,338 
539,878 


220,504 

222,082 

567,174 

977,847 

588,188 

• 

636,777 

5,890,536 

15,520,021 

4,401,802 

4,684,760 

575,453 

1,782,239 

1,687,640 

1,733,645 

664,843 

626,057 

1,043,011 
989,779 

1,380,364 

3,978,737 

773,195 

1,208,270 

1,094,434 
5,234,625 

2,159,463 
756,729 


189,182 
,041,298 
820,392 


417,278 

684,304 

1,995,712 

624,361 


24,597,840    23,220,274    24,346,722    25,900,796 


322  APPENDIX  I  [646 

APPENDIX  I.    Classified  Expenditures — Continued 


II. 


III. 
IV. 


V. 


1905 

1906 

1907 

1908 

1909 

1910 

I. 

52,537 

63,566 

63,520 

86,867 

79,065 

83,656 

2. 

695,326 

515,709 

591,710 

603,474 

675,524 

882,644 

3- 

1,324,658 

(a)  

1,031,497 

1,369,848 

1,208,950 

1,280,031 

1,436,317 

1,503,764 

4. 

1,093,714 

1,235,856 

1,338,263 

1,370,874 

1,547,595 

5. 

1,040,326 

(a)  

1.843,709 

1,113,489 

1,205,598 

1,419,782 

1,548,115 

2,058,743 

6. 

2,191,809 

2,699,394 

2,692,653 

3,360,377 

3,530,861 

(a)  4,017,819 

4,084,987 

4,380,447 

4,545,001 

4,681,298 

4,800,763 

7. 

746,137 

991,490 

1,037,378 

1,356,737 

1,495,118 

1,575,957 

8. 

1,234,596 

1,260,617 

1,069,739 

794,835 

764,414 

855,723 

9. 

1,032,822 

1,071,296 

912,729 

1,040,329 

1,339,740 

1,648,384 

10. 

5,731,588 

5,695,104 

5,951,294 

6,009,573 

6,464,762 

7,683,796 

II. 

2,121,035 

2,345,039 

2,311,173 

2,466,234 

2,924,371 

2,943,371 

12. 

607,137 

(a)  

(b)  

(c)  

728,315 

1,403,026 

1,191,861 

1,106,513 

908,609 





(d)  

13.  228,849    179,878    176,312    333,139    394,395    298,017 

(a)  1,342,005   1,175,595   1,020,828   1,493,780   3,086,537   3,478,775 

(b) 

14.  1,461,306   1,017,317    789,569    772,329    843,127    990,916 


(a) 
(b) 
(c) 


15. 


24,511,947    24,897,771    26,057,523    27,424,888    31,570,547    34,791,574 


1.  

2.  1,568,579      3,756,281      7,520,073      6,056,474    24,172,601     15,097,129 

3.  1,472,814      1,223,772      1,239,961      1,179,874      1,292,657      1,345,972 
4 

5.  926,011    372,270   1,720,989    54,743    746,712    895,002 

6.     2,474,139   6,051,500   6,326,711   5,292,612 


28,479,351     30,250,094    39,012,685    40,767,479    64,109,228    57,422,289 


647]  APPENDIX  I 

APPENDIX  I.     Classified  Expenditures— Con<:/«c?^d 


323 


1911 

1912 

I. 

107,725 

80,653 

2. 

1,002,974 

1,175,643 

3. 

1,446,984 
(a)  

2,047,420 

4. 

1,620,780 

1,757,922 

5. 

1,777,832 
(a)  

2,331,806 

6. 

3,546,931 

4,018,594 

(a)  4,907,321 

5,034,397 

7- 

1,585,957 

2,055,338 

8. 

1,007,743 

933,380 

9- 

1,663,942 

1,572,124 

10. 

7,262,884 

7,357,973 

II. 

2,945,432 

3,038,517 

12. 

1,283.258 

(a)  

(b)  

(c)  

(d)  

2,565,127 

13. 

232,805 

(a)  

(b)  

296,511 

14- 

3,045.208 

(a)  

(b)  

(c)  

4,237,952 

15- 

691,861 

730,760 

34,129,637 

39,234,117 

11. 

I. 
2. 

III. 

IV. 

I. 
2. 

3. 





V. 

I. 



2. 

21,507,561 

25,824,527 

3. 



4. 

5- 

4,862,186 

883,457 

6. 

8,664,240 

8,486,734 

69,163,624  74,428,835 


324 


APPENDIX  II 


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ICOO 

1       M  M  m  '< 

r  sssi 

^  1 

'<  t 

?^ 

IC 

4    W            H 

N 

lili  iiiii  ^ikki 

651] 


APPENDIX  II 


327 


•f»dl»33^  pZ»OX 


r^  ID  i/»  w  »«i      m  »~vo  •*•  0\ 

\n  »n  n"  M*  o"       m  inoo" 


>0  ■♦  i«  ••  •♦ 
\0  N  «^  rn  «»> 
O  «»   On  o  <n 


00  ■♦00  \0  M 
m  «  «  O  « 
"♦©"O  00^00 


•*  ■«•  tr,\0    ON 


M  n  N  M  « 


pnn  J  jstux 


papuog 


•suBoq 
Xreiodmax 


O  NO  00  M  00 

moo  00  «  « 

t^  ■♦  ON  fo  o 


OnOO  o 
fi  •^  o 
m  fo>o 


■*  ON  o 

« NO  ►£ 


W  «  NO  ■<»■   NO 


OvOO  t^  to  o> 
■^00  «^  «^  <2 
M  M  ef  cT  n" 


■  ONOO  NO 
_   -    «  NO   ■♦ 

00  00  00  On  On 
On  t^  ^00  <^ 
M  -^  to  U1  N 
C«  NO  OnnO  o< 


I  lONO 
I  H  cr, 

I  NO  O 


1^  N  t^  On  Q 
«  NO  ■*•  t*.  O 
O  -^  N  ir>  •* 


CO  f)  CO  O  C*l 


»n  o 
NO  t^  in  ( 


'S;s^ 


O  c^  fO  On 


w  r<.Q  ro 

ON  ON  «nNO 

»^  cT  cT  tC   d"  ■*  m"  woeT 

WMOnO  ^ONWWt^ 

COM    to  On        m  «  ■♦ 


•pnnj  p^iaaao  l«»ox 


Q 

w 

Ph 


'sn09aeip9sip^ 


^00  »>.o  to 

00    M    ■♦  ONt^ 


M  >ri  •♦  -♦NO  oorsOMW        ixoooooo       iono  O  Onoo 

ONOO  Nowro  Nor»MNO<n      «fOM«ON      m  ts.oo  ■*nq 

\r,tX  ^»   M         m"  «  00   •*  ■*  c>  m"  cJ  >o 

•♦l^-^tO-*         '♦mON  "*0O  •*  M    M    On 

OoooOno       Noctro-^co  cinct 


t^NO  O  M 
M  O  10  10 
■♦  CONO     ■♦ 


NO  o   o  ( 


NO  ro  ro  M  00  >o  'voo  O  O  I 

■♦COMWOn  r^»Ht^ONHI 

•?  "  t  "I,  T.  1.  *5  *!.  *2  *V' 

tC  cT  tCoo  i-T  ^  n"  ^  d>  ^^i 

fO  M    ONNO    10  V)  «  NO    '♦  '♦, 

moonooni«»  ooMtsON*: 


M       H  n 


■♦m    «00   Oi 
t<»  ro  •♦  CO  t». 


in«  ONCOm 


lOOcO-^C*  ©•^'♦MnO 

t>.  W    •♦NO  00         nO  NO    M    m  c*» 

■<*-no  on  r^oo       t>.  m  t«.  m  •♦ 


I  00  lONO   Ok 
I  irt  t^oo  M  I 

I    ONOO    O   Ut' 


spaapiAiQ 


■ipanj  a»Bjs 

mOiJ  Sp3330JI  J 


00  »r>  r^ONNO 


ONO  CO  5> 


tOOO    t^NO  00 


M  NO     «     <0  M 
M     0.0     MVO 

O  NO   •♦  10  10 


On  c«    CO  O   ■♦  ON  t^  ♦NO 

OoocomnO  »N^«t^ 

^  *?  *t  "IT  ^  ""L,*^  ^*J» 

CO  ifl  o  »^  10  t^  10  in  cT 

H^-OOOO'*'  «OlA«OCO 
♦  «1    «     CO  M 


ONOO    t^ 

COON  Q 
C4    C«  nO< 


NO   M   COOO   •♦  ♦  CO  »o  t» 

Ph  C«    ON  n    W  t^  ♦00    O 

COOO  «\  ■♦  «^  *^  '?.'*i.  'S 

00  no"  ♦  ♦  CO  ci'No'  CO  m 


•VOM  »I«S 


'snoi)n) 


■BaiJ»iioi 


•spireq 


M   »•   O   Q 

moo  «  5 
m  ON-*5 
«*  »^  m"  (f 
m      M  (» 


•  «0  ONOO     ON 


»  (>.oo  O  10      rx  ONOO  cy  -♦      Onoo  o  00  00 

cOnO   «   CO  M         O   On  ♦  OnnO         in  «  no  00   (^ 
■♦OnmmO        mcocomro       ♦ONM9t^' 


•panj  jew 
•nar)  o}  p3Ji3|sin3Ji 
3na9A3j  iBire3  snjdins 


88 


:«?! 


8'8"8"88     S^S'SS" 

♦  n  c«  M  n       c«  fi  c«  « 


tv.to'^on  oo^-c«Hoo      0000  cono 

OnnO   tNKW  C^OniocOcO        CimONin 

nO^  i^oo^  ♦ab  oo^c^cj-Nj-*       »>.c<inin 

<o  *•  mo  "♦  t*       \ri\n  ■^ 

»N  c«   m  R  M  M 


5A- 


NO    O    ON  O    w 


laainaisAOf) 


■sa«««g 
pstiof^  ta04j 
saot)ii3Aqns 


«  CO  ♦  m   NO  t«.00  On  O 


00  00  00  00  OO    00  00  00  00  00    00  00  CO  00  00    00  < 


M  «  CO  •♦! 

m  m  m  m  1 

00  00  00  00  0 


328 


APPENDIX  11 


[652 


'saot)eiodJ03 


to  t««  N   ir>  « 


M         0^|J   C7i  O  00 


ot^iooci  Owoo'*^  toMMinis 
■*  H  rovo  O  0>H\o>no  irto>OvOt> 
-<fOMiivcii      oooonoooo       «*>t*»Moo« 


M    rOM    N    >^ 


^VO   "J-        0>  tv*-  ■^vo         »O00   9    «^  O 

«i  o>o       e«  vo  vo  (M  o       «  t-.  ■^00  vo 


Oror^oo      000000000      xot^t> 

«    f.00  00    N  N    t^OO    O-O  N  \0    n 


peojiiB^ 


»oaBJtnsax 


•XBX  nnsa 


tN  O     M     M    V> 

CO  M  rooo  «o 
**  fo  pT  en  m"       -^  «n  CO 


MvSoo  M 


w    i«-  fO90         vo  00    O  O    M 
O   "4-  m  ro       in  irivo"  tr> 


?r  2' 


(■XO  mo  O  M  \0   m  O  vQ' 

2  *?!  "«  '^  "Q  <?J  '^^  '^  ° 

r  t^  rC  N  vo  •«?  OvOO   w    r»5 

I  M  M  vo  vo  vo  vo  moo  vo 


I    Ov  txvo 


N  vo    O  *  «rt 

>n  O  00  w  «r) 
«0   t>  fOvO  vo 


O  O  Ov  t^  Ov 
■*vO  00  <N  IT) 
O  O   o>  ■<*■  « 


00  0<  M  c<  01 


«   to  O   «   w        vo   tnvo   t*.  tr, 


rOOO   O  vo   -^ 

vq_  qvvo  fo  ■* 

Hrvo"  -^  M^VCT 

W   M   N   fO« 


00  »o  tfv  t^  o 


to  •<♦  t^  ov  »0 


■^H    fO  O 

CO  to  ov  to 


w   W   fO  fO  fO 


«   M   n         M   fO  M 


•XBX  looj 


•XBx  lonbiq 


ooiiany 


•XBX 


»o  H    »« 

H    M    C*» 


Ot  O  00   Ov  O  Ov  Ov  tovo   Ov 

5  e*  N  Ovto  M  too  «  o 

t>.  «^  to  OS  qv  CO  f^^  t^. 

»C  ci*  o"  ^  to  10  t^oo  -^  to 

o  fo  0  M  N  t>;  t".  6  to  o. 


O   OvN 

«     M 

r^vo 


Nvoro      r^oovtoN      oo-*-  rooo  o 

0000         Ovt^OvtotO      OOOvtoO< 
to  tovO         mO'^Co'^        t>.MvO'^< 


lO'*-O>00    N 
to  so  •<•  ro  fO 


Mvororow  OMOOooto 

OvOt^totx  Ov^MOOO 

*1 1;  "1;^°^  <i  'i  "1;  'i  "i 

m'vo  'f  cToo  c>oo  to  ^  eT 

rOMCINM  MMM 


lOOtO  tOOlOlOlO 
•^fOto  vOOQfOO 
to  •♦00       vo  '♦■vo  to  M 


O    to  O    N 

«   tovO   fO 

M^  «^  to  qv 
w  »  cTcT 


•XB. 
UOUBZinB! 


WXQ 


•XBX  »J 

-soBJx-iaois 


•XBX 
38B3aiOJ\[ 


•XBX 

93aB)U3qax 


uoi)BJodio3 


J  §,• 


100  OvfO 
J.  O^vO  vo 
PvO*  to  t? 

I     CO  to  M 

■>  too   H 


to  <♦  Ov  ro  Ov       1-1  •v^oo  C  — 

(lOOtOHto       vOvOtoOto 
rovo   wvooo         OoOvOvOOv 

vo'(>fo  cf  00 

to  to  Oi  to  to 
CO  Ci  0\  M  M 


«  ov  10  to  to 

Ov  to  to  O  to 
Ov  to  OvvO  vO 


•S9X8X 

IBpsdg  pUB 

tiopisdj-ao^ 


•XBX  3»«^S 


10  M  to  ro  to 
to  Olio  O  10 

<M     H     lOVO     M 


♦  OSOO  00  to 
to  O  to  HI  to 
q^vq^  CJ^  ON  N^ 
■^  O  tC  o  to 
to  M  tooo  vo 


to  to  to  to  fO 


00  00  ro  «  VO  ■♦oo  ■*  ro  ro 
tovO  tooo  to  OvvO  to  «  O 
•^lOtot^-^         MC4totOtO 


I   OS  n 
I  vo  00 


♦  to  «  00  ro 
O  •*  tooo  Ov 
MOM 


00    -vl-  O    H 

o>  w  to  ■<»■ 

VO    Ov  to  •^^ 


to  (T  i-T  i-T  to  M  «♦  d"  pT  m" 

■<^  p)  tsvo  M  ro  -*■  o  M  eb 

to  ci^  q^  to  to  ro  10  t^oo^  q, 

iihrtocrcr  to^'"? tovtr 


to  O  00  H  M 
to  >*•  •*  ov  to 

00^  to  qv  M^oo 

^  OvOO  Ov  w 
to  Ov  C4  H  00 
vo  00^  0«  O.  '^ 
V)\0   ov  <>  tC 


Ov  M  00  M  00  VO  M  tOvO  CO 

o>  H   fovo  vo  rooo  00  fOOO 

M^toq^fOto  toOvM^loO 

O"  0\  M-vo    tC  0~  ro  to  (^  o" 

0>  O   >o  N  00  O^O    O  vo   O 

tooo  o__oo_  to  *::  f^  ►i,  >^  •^ 

(^  Ov  ro  o"  cT  O   ■*  tovo'  ■vf 


VOOOMtoOV  MMM'^M 

00  OVOO  ro  to       to  o  O  to  CO 
*J.  "5  ^"^  ^      *?  't  *?  ^  '^ 
d^  to  to  o> 

•*  O  " 


OvM  vo  m  Ov 

O  CO  M  •^^  to 
CO  (>  to  H  to 

vo"  ci"  covo  'i- 


.8 

to  to  to  to 


•»»«a 


to   vo  toOO  ON  o 
to    to  to  to  tooo 


653] 


APPENDIX  II 


329 


S^K?^^ 

§5ff§ 

.g^iC!^?? 

;rs?i.3-v8 

tx  ■><-vO    0    0\ 

in  0  CO  CO  c» 

•SjdlOTd^  IBJOX 

'^^^t^. 

'SA^A^ 

'^'i?>8?'S, 

«  ':;  0.  o«« 

'iS.KJCJ^^cS 

^^oiM% 

m  romvovo 

W    COVO    t^Wl 

N  t>.  t>.ao  lo 

OtvO   0   000 

000     0>M 

f» 

M    H     M    H     H 

M 

'SUOU 
OBSUBJJ, 


•suBoq 
papuog 


•SUBOT[ 

AiBJOduiaj^ 


OS  irivo  00  e* 

(4    O    t>.lH0O 

U100  'o  CTi  m 


CO 


^^«  't  •^  '^      '^  -^  1  't!  *i 
vo'vo"  ■<?  «n  pT      vo  ■<?  h'oo'vo 

O    O^  •*•        0»  O  O-vO    O 


coco< 


itn-o  M- 


O  in 
O   Pt 


o"  invo 


^2 


•pan^  IBiaaao  jbiox 


covO  vO 


■*  t^vo  r^ 


»>«  0»  t^  I 

CO  tn  o^  CO  r^      O  vo  oo  00  co 

CO  h'  hT  CO  "f  vO  vfTso"  covo" 

O^t^NvOCO  OsrOpHt^-* 

OM'^wo  t^'«i-co>nt». 

N  «  CO  CO  CO  coso"  invo'viT 


N    •*€«  SO  vo 

•*  vn  M   M   o> 


CO  O  vo    CO  CO 

M  vo  00  o  m 
00  \o  000  00 


«  c«  «  •*  M 

M  osinvo  >*• 
r-  O   Ov  OS  M 


CO  -^oo  «n  t^  -"t-vo  '*■  e»  so 

'^^  "^^  'i  "CJ  °-"^  '^  '^^ 

W    CTOO    rOOO  oo"  CO  H  vfT  «o 

■»^  inoo  CO  c^  os  c»  -^  t^so 


sooooOoo        000 


5i 


>< 

s 

w 


•snoauBiposij^ 


t^HOlOM  sOsOm    OsOO 

p>.  CO  CO  moo  in  ir>  r^  H  00 

CO  H  M  00  CO  o  q^  -^  O  « 

t>.com      m  r^ro^Mtn 


0\  t^  •<*-so  00  m  «  m  t^so 
CO  cooo  CO  m  •^  OS  o  so  •♦ 
tj  q_  tjvo^  "^      cj  M_vo  •^  t^ 

tC  C0>0    CO  (> 


O  -"t-  «^so  m  osoo  cioot^  o^j^oei-r^ 
3»so  r>.e«in  ©■♦r^oei  t«.  i>.oo  o  c* 
somwooso       mostxinct       m  ■<4-oo  «  o 


Ss-^-SS 


»nso  OS  CO  OS     00  t^so  t>.  r>» 


•s>nreg  uiojf 
spuspiAiQ 


•spunj  ajBJs 
uioij  spasDOJj 


OsO  OsOs 
M  CO  OS  OS 
^^  <*>  moo 


0>  CO  CO  o  m 
H  N  00  moo 


W    CO  •*  CO  CO 


t^oo  w  M   » 
■^  t>«  ■*  i^  1 


t>.vO    tN,  CO  « 


t^  •«»■  t>.oo  ■* 


?J: 


t^OSN  H 


et  ■<*•  w  00  -"I- 
*i  H_^  0(^*0, 00 
otTso'so  <y>^ 
c«  m  CO  CO  CO 


•svoA\  M«S 


'saoqn) 
-psaj  ojBjg 
moij  spaaooj  J 


so   t^OO   t^so         O   0>  M  UISO         C«   OS  HI   Osoo         M   CO  ■*  m  ro 
■  'HOsPtvO         MOOCtOsu-i        coo   l«»  H   t^ 

■<♦■  O     M     t^  ■* - 


OS  ■<»;  M  0^00 
O  cooo"  c>sn 
VO  10  tnvo  so 


vo    l^vO  00    N 

vo  00  ^soo  vo 


_^^  »n  CO  tv  I  _^ 
cTocToo'oo'  tC 
c^vo  00  0000 


t^  c«  moo  o>      t^  CO  M  c*  ■<♦• 


0  ei  m  M  OS 
■^  1. 1  "Q^ 

00    CO  tC  CO  tC 


N     ►,■<*•  OS  Ht 
t^COCO  t>.C« 


00  «  ■^  w  ■<»• 
SO   OS  O   OS  OS 

«  o;vo  vo  «^  I 
inoo''o(r  «n  «^ 
so  m  torn  m 


tC  cTvo  m"  hT      fT  h"  tCoo 

vo   t^  txOO   M         OS  C3SVO    t«» 


t^  ts.  t^  o   t^ 
m  t^  N  CO  CO 

H     ■^f  M     -^  CO 


•-■^M^roqs  vo_^qvt^t~. 

vo'vo"  ■^  c>oo~  vo"  ds  cT  •*oo 

CO  «  m  t^vo  ■«♦■  M  00  M  OS 

■<»•■*  CO  ro  CO  «    CO  ro  ■♦  CO 


5-    8^! 


CO  o  10 
'♦^  CO  >n 

O  CO  o 


•♦  ■*■♦•»^m 


00  M  H  m  I 


•sauajjoq 


•spuEq 
JO  spsaoojj 


M     CO  «    «    CO 
«    CO  CO  CO  CO 

o-  P>  •*  tv  m 


WO) 

V  e 
«0 


lasuiiudAOQ 
•S  'a  raojj 


•S3JBJS 

psjia/i  uiojj 
siioi)U3Aqns 


•ajBQ 


% 


so  00  -^oo  «  m  CO  c*  m  m 

t>.  N  cooo  m  ■«»•  H  OS  CO  ■ " 

OS  qsoo  c^  cj^  ^  "CJ  'i  °  *« 

O  c<  mvo  ov  H  H  so  m 

M         O  00    CO  CT   CO 


00  0000  00  00 


H  «  CO  ■>*■  m 

so  vo  vo  vo  vo 


5? 


M  N  CO  •*  m 
r^  t^  f^  o.  (^ 
00  00  00  00  00 


vo  r^ 
o*  o 

vo   P<. 


CO  ■♦  m     vo  c^ 


00  00  00  00  00 


coood 


330 


APPENDIX  II 


[654 


•snoi»BJOdJ03 
sno9nBii30sii\[ 


•XBX 

PBOJIIBH 


•XBx  ^lUBg 


r)00  c^  ■*  t^ 


10  t^  O  00  00 


00   ■♦  M   <*  >A 
00  o  M  c»  o> 


t^         -3-  CTv  t^ 

o'oo 


moo  O  ro  N 
<n  O  CT>oo  tN 


o>oo  in  o 


N  «  0.0  « 

t^  CO  0>  ■*  -^ 
to  ■*  N  00    O 


vO   H    Ok  10  O 
\0  00  ■♦vO   rrt 


f>  t^»0    h*  On        0\  O  f>  t^OO 


IT)  O  fOOO 
T  O   H    N   N 

<0_  N  N  CO  •♦ 
cT  to  M    M    in 

00    t^  t^OO    O 


l>>  O  «   t^  o 
f>  N    O    N    ON 

q^  «^  «n  »>.  <> 
o>  t>.  -^oooo 

M    M    N    M    C4 


O   On 
O   10 


O   «    t^  «♦  O 

■<foo  o  r^  ON 
o>o  -*•  o  fo 


M  1J-00  ei  o 


in  On 


otToo"  ro  cT  cT 
CI  «        10  f) 

0i- 


tN.  On  m  m  m 

1-.  ■*  C«  OnCO 
On  t^  •*  «  O^ 
tCiO  10  cT  C^ 
fo  r<^  o  -^00 


I— ( 

Q 

w 

fin 
< 


•XBX 

}BOqUIB9)g 


■XBX  lOOd 


•XBX  'O^^biq 


•sapna 
noijany 


•XBX 

aiuaoiq 
s.jajpaj 


NO  «  "♦•  w  t^ 
'♦•00  to  t^m 


COVO    lONNO  NO0000^»t^ 

iiWHfn'^  ooowwm 

!>.  t<.oo  oo__  •♦  ro  1000  ♦oo 

vo"  COOO   ■♦  vr  rn  On  o     "    ' 

W    lOvO  00    On         "     


000         1000    mOnO  OvCHCOt^N 

m  ON  ■*•      N  mvo  r<.  tN  m  t^  t»-  t>»  on 

On  On  w^        ro  OnoO    «_00^  °°  ^  'Z'^i-  "^ 

ooio»C       •N^eTirii-rvn  t^M'indNro 

NOOHCoro  onnh  conO 

"^  'i  1  *t  'V  "^  f'i.  "i  "^ 

fO  ■♦  -^  'f  -^  ■♦  -4^00  <>  <> 


8-*  On-*  On 
O  w  N  tN. 

in  in  ro  in  c>. 
NO  tC<>  o  oi 
00  o^  m  -^00 

♦NO  m  M  m 

On  On  On  m  On 


•XBX  »Va  pwn3»S 


•XBX 


UOpSZIUBSiO 


•XBX  "J 

-SUBJX-J130»S 


•XBX 

93b3)jo}^ 


•XBX 

aouBtuaqui 


•XBX 
aoijBiodjo^ 


lONQ  00    O  00 
OOnO    On  m  U1 

H  M  M  H  n 


N  m       «  NO  fOOO  On  m   t^  q   o  no  m 

'    '        m  ■"^  mno  t>  Onno  5  00  On  ro 

OnnO  OOvOt^  OmONO'*  o 

fo  cT  ■^  -^vtr  in  ^  M*  ^  ■<*:  in 

O  m  ro  i>»  in  Onoo  no  on  m  00 

»nM»n-*ro  Mfo<*)Mfo  ■«■ 


ro  m  Onoo  m  o 
N  fO  fO  t>.  vo  NO 
>*■  in  ON  H        «   o 


ro  t^  conO  »"» 
ON  ON  fO  in  ■♦ 

ro  r>^  Q  m  ro 
no^  in  ON  roNO_ 
NO  into  in  ■♦ 


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655] 


APPENDIX  II 


331 


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332 


APPENDIX  III 


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APPENDIX  III 


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334 


APPENDIX  III 


[658 


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659] 


APPENDIX  III 


335 


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336 


APPENDIX  IV 


[660 


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66i] 


APPENDIX  IV 


337 


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338 


APPENDIX  IV 


[662 


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APPENDIX  IV 


339 


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340 


APPENDIX  V 


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APPENDIX  VI 


[666 


APPENDIX  VI 

Table  Giving  Special  Franchise  Valuations  in  New  York  State. 


Year. 


Number  of 

Corporations 

Assessed. 


Valuations. 


New  York  City. 


All  Others. 


Total  for  State. 


1900.. 
1901.. 
1902.. 
1903.. 
1904.. 
1905.. 
1906.. 
1907.. 
1908.. 
1909. 
1910.. 
1911.. 


1376 


2494 


$219,679,351 
211,334,194 
220,620,155 
235.184,325 
251,521,450 

302,193.550 
361,479,300 
466,855,000 
492,492,970 
474,001,900 
465,409,600 
481,018,100 


$46,523,408 
44,416,57 

47.397,615 
49,614,267 
51,167,307 
54,636,005 
66,472,159 

88.453,797 
108,579,587 
113,987,467 
120,374.215 
133.815,580 


$266,202,759 
256,150,765 
268,017,770 
284,708.592 
302,688,757 
356,829,555 
427,951,459 

555.308,797 
601,072,557 

587,989,367 
585,783,815 
614,833,680 


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Bishop,  J.  L.  History  of  American  Manufactures.  (3  vols.,  Phila- 
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Brodhead,  J.  R.  History  of  the  State  of  New  York.  (2  vols.,  New 
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Bruere,  H.    The  New  City  Government.     (New  York,  1912.) 

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Chaddock,  Robert  E.  The  Safety  Fund  Banking  System  in  New  York 
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Dewey,  Davis  R.  Financial  History  of  the  United  States.  (New 
York,  1909.) 

Donaldson,  T.  C.    Public  Domain.     (Washington,  1884.) 

Dougherty,  J.  Hampden.  Legal  and  Judicial  History  of  the  State  of 
New  York.    (New  York,  191 1.) 

Durand,  Edward  Dana.  Finances  of  New  York  City.  (New  York,  1898.) 

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Ely,  R.  T.     Taxation  in  American  States  and  Cities.     (  New  York,  1888.) 

Hammond,  J.  D.    History  of  Political  Parties  in  New  York.     (Coop- 
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667]  343 


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McMaster,  J.  B.   History  of  the  People  of  the  United  States.    (7  vols., 

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MoREY,  W.  C.     The  Government  of  New  York,  its  History  and  Ad- 
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VITA 

Don  Conger  Sowers  was  born  at  Spring  Hill,  Kan- 
sas, on  February  17,  1883.  He  entered  Baker  University, 
Baldwin,  Kansas,  in  1900,  receiving  the  degree  of  bache- 
lor of  arts  in  1904. 

In  February,  19 10,  he  entered  Columbia  University  and 
took  courses  until  June,  1912,  under  Professors  E.  R.  A. 
Seligman,  H.  R.  Seager,  J.  B.  Clark,  H.  L.  Moore,  H.  R. 
Mussey,  F.  H.  Giddings,  V.  G.  Simkhovitch,  C.  A.  Beard 
and  F.  J.  Goodnow  in  the  Faculty  of  Political  Science,  at- 
tending the  seminars  of  Professors  Seligman  and  Seager. 

From  1904  to  1910  he  was  engaged  in  making  mag- 
netic observations  for  the  Department  of  Terrestrial 
Magnetism  of  the  Carnegie  Institution  of  Washington. 
This  work  necessitated  extended  journeys.  During  this 
period  the  following  countries  were  visited :  West  Indies, 
Venezuela,  Peru,  New  Zealand,  Society  and  Samoan 
Islands,  China,  Chinese  Turkestan,  India  and  Europe. 
At  various  times  for  short  periods  he  was  employed  by 
the  United  States  Coast  and  Geodetic  Survey  on  mag- 
netic work. 

In  January  1913  he  entered  the  Training  School  for 
Public  Service  conducted  by  the  Bureau  of  Municipal 
Research  of  New  York  City  where  he  remained  until  the 
following  October  when  he  accepted  the  position  of 
Professor  of  Municipalities  and  Public  Accounting  in 
the  University  of  Oregon. 

347 


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